Unlock the secrets of the Blue Ocean Strategy and elevate your business strategy with these key concepts explained in detail.
About 1 in 10 business find themselves thriving with healthy profit margins and almost non existent competition. Businesses who find themselves in such an advantageous position are thought of occupying a blue ocean space. The Blue Ocean framework, is a strategic planning tool that provides businesses a methodology to creating uncontested market spaces.
Value Innovation is a key concept of the Blue Ocean Strategy Framework. It involves creating exceptional value for customers by simultaneously pursuing differentiation and low cost. Traditional strategies often force businesses to choose between differentiation (offering unique features and benefits) or low cost (providing products or services at a lower price). Value Innovation breaks this trade-off by finding ways to deliver superior value at a lower cost.
For example, Cirque du Soleil revolutionized the circus industry by offering a unique blend of entertainment and artistry, while reducing costs by eliminating traditional elements like animal acts and lavish sets. This allowed them to attract a new audience and create a Blue Ocean market space.
Oceans:
Blue Oceans: Blue oceans refer to new, untapped market spaces where competition is minimal or nonexistent. These markets are created by innovation and offer opportunities for profitable and rapid growth.
Red Oceans: Red oceans are existing market spaces where businesses fiercely compete for a share of the limited demand. This competition leads to saturated markets, price wars, and reduced profit margins.
Real World Example: The introduction of the smartphone can be considered a blue ocean. When smartphones first emerged, they created a new market space with little competition. Conversely, the market for traditional mobile phones before smartphones became popular was a red ocean, with many companies competing on features and price.
a study of business launches in 108 companies, we found that 86% of those new ventures were line extensions—incremental improvements to existing industry offerings—and a mere 14% were aimed at creating new markets or industries. While line extensions did account for 62% of the total revenues, they delivered only 39% of the total profits. By contrast, the 14% invested in creating new markets and industries delivered 38% of total revenues and a startling 61% of total profits. (Harvard Business Review, 2004)
The Six Paths Framework is a key concept of the Blue Ocean Strategy Framework that helps businesses identify new market opportunities. It involves analyzing six different dimensions to uncover untapped demand and create new market spaces.
For example, the Yellow Tail wine brand used the Six Paths Framework to identify a new market space by targeting non-wine drinkers and positioning their product as an approachable and affordable option. This strategy allowed them to compete with beer and spirits, creating a Blue Ocean market in the wine industry.
Analyzing the six paths can provide businesses with a fresh perspective and uncover opportunities that were previously overlooked.
The Four Actions Framework is a key concept of the Blue Ocean Strategy Framework. It involves asking four key questions to challenge the existing industry boundaries and create a Blue Ocean market space.
By answering these questions, businesses can identify opportunities to differentiate themselves and create a unique value proposition. This framework encourages innovative thinking and the exploration of new business models.
For example, Southwest Airlines implemented the Four Actions Framework by eliminating in-flight meals, reducing seating options, and increasing the frequency of flights. This allowed them to offer low-cost, no-frills air travel and create a Blue Ocean market in the airline industry.