Blue Ocean Strategy

6 mins read
by Angel One

Building a business is no easy task. Typically, it takes years for businesses to establish their strong-hold among customers. But, the modern world boasts of many success stories wherein businesses have reached the million-dollar mark in just a couple of years. These businesses are offering innovative products and services and creating a niche, untapped market. This article explains the Blue Ocean Strategy, which looms in this realm of untapped, potential markets. Find out what it is along with examples, benefits and how to make the shift.

When we say it’s the blue ocean strategy, guess what the traditional market is called. Yes, the red ocean. It is full of existing market players, and you have to fight tooth-and-nail to survive the competition. The red ocean focuses on exploiting existing demand and make the value-cost trade-off.  

What is the Blue Ocean Strategy?

The Blue Ocean Strategy proposes that instead of fighting for a share in the highly competitive but shrinking market, feast on the unexplored new segments, thereby making the competition irrelevant. Since market boundaries are not defined, it can be reconstructed by new ideas of the industry players.

Based on the eponymously titled book authored by INSEAD professors W. Chan Kim and Renée Mauborgne, ‘Blue Ocean Strategy’ is a marketing theory. In the book, the professors assert the hypothesis that strategic moves can create a leap in a company’s value, along with its employees and buyers. At the same time, it unlocks a new demand and makes the competition irrelevant. The strategy revolves around devising innovative products and services and acquiring the uncontested market by creating new demand. It further states that there is no relevance of peer competition since the industries designed under this strategy are non-existent. Businesses can create new products, and in turn, generate demand, by making unique products familiar to their customer base and by adding advanced features that make it stand apart.

Blue Ocean Strategy Examples

Here are some Blue Ocean Strategy examples of companies that have captured the imagination of consumers

1. The Ford Motor Co.

With its introduction of the Model T car, The Ford Motor Co. in 1908, created an automobile which was less expensive and more reliable. It created the mass-producing manufacturing process offering cars at a fraction of the price offered by competitors. The company captured 61% of the market share by 1921, also replacing the principal mode of transportation, i.e., horse-drawn carriages.

2. Apple Inc. iTunes services:

Apple Inc. created the first legal music downloading format in 2003 with iTunes. It effectively curbed the pirated music industry and created a new stream for revenue, in which consumers were more than willing to participate. The downloading service offers high-quality music with easy navigation functions.

3. Cirque du Soleil

Cofounded by Canadian businessmen Guy Laliberté and Gilles Ste-Croix, Cirque du Soleil combines the circus with sophisticated adult theatre. Cirque du Soleil reinvented the circus, giving it a modern appeal that both children and their parents can enjoy. The show features acrobatics and jaw-dropping physical feats, set to original music and fresh storylines.

4. Netflix 

Perhaps the best example one can give of blue ocean strategy is Netflix. To many of us, it has been a lifesaver in many ways. And secondly, it offers curated content matching your viewer profile. When it comes to blue ocean strategy, Netflix created a market that didn’t exist before. Instead of competing with other movie rental firms, it created the first movie streaming platform. Netflix was able to create its own demand.  

The Red vs the Blue Ocean Theory 

The theory differentiates the blue ocean from the red ocean. With numerous competitors and cut-throat competition, the traditional market leaves very little space left for new businesses to succeed. On the other hand, the blue ocean strategy creates new demand in an uncontested market. Blue ocean is all the industries unknown.   

Blue ocean strategy is a non-zero-sum game. There is ample opportunity for companies in the new market to grow, both rapid and profitable. 

With all that being said, the question that arises next is how companies can adopt a blue ocean strategy and move to a non-competitive market. Essentially, the blue market theory suggests a deviation from market competition to market creation.  

How To Make Successful Blue Ocean Shift

While studying the principles of a successful transition to the blue ocean, the authors identified three factors that are critical for the shift.

Mindset: In an Agile management environment, a blue ocean shift is essentially a change in the mindset. It is about breaking from the traditional business concept and exploring the uncontested areas. Change in mindset requires companies to expand their mental horizon to see where untapped opportunities lie, including asking a different set of questions and contesting the existing process to see what new demands are created. 

An example of a successful change in mindset is Salesforce, which upped the customer relationship management game by offering companies a subscription-based CRM service hosted in the cloud. The Salesforce incident epitomises how a company can transition to the blue ocean by changing the thinking abilities. You avoid competition and create a different market by thinking differently.  

Tool: Management tools are critical for making a systematic shift to blue ocean strategy. Be mindful, adopting a blue ocean strategy isn’t a one-off policy change but requires gradual movement to shift to the new domain. When it is done in an orderly manner, it creates a big leap for the company, unlocking growth that is both profitable and rapid.

Human-ness: The theory emphasises that ‘a humanistic process’ is essential for a successful shift to the blue ocean. It needs to inspire people’s confidence to participate and driving the process for successful execution.   

How companies can adopt the Blue Ocean Strategy – the five-step process mentioned in the book

1. Choose the right place to begin by constructing a Blue Ocean team

2. Get on board with the current situation your company is in

3. Detect the hidden pain points which are responsible for limiting the current industry size and uncover the untapped customer potential

4. Reconstruct market boundaries systematically to develop alternative opportunities

5. Select the right move by conducting a rapid market test. Finalise and launch the shift once done.

Benefits of incorporating the Blue Ocean Strategy

1. The strategy helps companies find uncontested markets while avoiding matured, saturated markets

2. It helps companies overcome the impediment of constant competition and break free from traditional business models to expand their demand and profitability

3. It helps companies increase their value, innovate, and create new value for customers, thus developing their growth potential.

Final word:

Operating in an uncontested market is a dream for any business. Blue ocean strategy shows that it is possible through innovation and questioning the traditional business process. Blue ocean strategy doesn’t propose dividing the market or the globe. It instead suggests the idea of thinking differently. However, it is not so easy. To some, it may sound like a little too ambitious. It requires a complete change in the mindset to see an existing problem in a new light to discover new opportunities. But for companies who dare to venture into the untested water of the blue ocean, lies unbounded growth opportunities. Companies like Apple, Netflix, or Salesforce have already demonstrated the blue ocean strategy particularly well.   

The Blue Ocean Strategy is indeed path-breaking. It is recognised as a formidable strategic planning tool that helps companies acquire new markets. For more information on Blue Ocean Strategy, reach out to Angel One advisors.