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Blue Ocean Strategy: Winning through Value Innovation

Blue Ocean Strategy

Blue Ocean StrategyLike so many big ideas, Blue Ocean Strategy was not new when its founders conceived it. They just gave it a resonant name and started to flesh out the idea.

In this case, it was W Chan Kim and Renée Mauborgne. They gave their Blue Ocean Strategy concept a set of case studies to tempt new adopters, and some thinking tools to give them confidence. The result is an approach to developing new products and services with a 15-year track record.

If you’ve not yet encountered Blue Ocean Strategy and the concept of Value Innovation, it’s well worth exploring.

Why Do We Need a New Strategy Strategy?

Every year or every few years, each business re-thinks its strategy for the coming period. How will it continue to make money and thrive?

Businesses are forever looking for that competitive edge; a niche that will let them outstrip their competitors and secure unchallenged long-term growth.

So, any management thinking that can offer a new way to find that edge will be eagerly consumed. Which means that a new strategy to build your strategy will have immediate appeal. Especially when that new approach promises an escape from price competition, falling demand, reducing margins, and the blood-red struggle against a slew of equally capable competitors.

And that is precisely what the Blue Ocean Strategy offers… by definition.

What is Blue Ocean Strategy?

The Blue Ocean is a metaphor that contrasts with the Red Ocean.

The Red Ocean is a site of full-blooded competition among established rivals. The Blue Ocean, on the other hand, is a pristine market place, where nobody is yet competing. The first company to sail into the blue ocean gets the whole market to itself. At least, that is, until competitors start to sail in and challenge their incumbency.

Red Ocean - Blue Ocean

 

Definition of a Blue Ocean Strategy

Here is the definition that Kim and Mauborgne give, on their website:

Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant. It is based on the view that market boundaries and industry structure are not a given and can be reconstructed by the actions and beliefs of industry players.

Now, is this new? No. Forever, companies have been in search of a new market; a chance to create a product or service that no-one is offering, and therefore steal a strong ‘first-mover’ advantage.

So, what’s different?

Two things, I’d say.

  1. Good naming is a vital aspect of creating a sustainable brand. Kim and Mauborgne came up with the ocean metaphor and also with their term ‘value innovation’ – see below.
  2. A toolset. Although a number of Kim and Mauborgne’s tools overlap and look similar to one another, one or two stand out as valuable assets in a quest to find something new to try.

Did you say ‘Value Innovation’?

Kim and Mauborgne compare the common term ‘value creation’ with their own term, ‘value innovation’.

They assert that ‘standard’ value creation is an incremental approach to increasing the value of an existing product. Often, companies do this by harnessing incremental improvements in the technology available to them. Value innovators, on the other hand, make a leap forward, and so render their existing competition irrelevant to the buyers they are targeting.

So, it’s all down to increment size, I guess.

You can read more about their ideas on Value Innovation on their website.

How to Find your Blue Ocean

Thinking Tools

The Blue Ocean Strategy website lists a number of thinking tools that will help you to identify your own bit of blue ocean. There are 14 at time of writing, although some look very similar to one another, and some seem merely to state the basic premise of the idea.

For example, the ERRC Grid and the Four Actions Framework both identify the four routes to a blue ocean:

  1. Eliminate some factors that the current industry relies upon
  2. Raise one or more factors well above the industry standard
  3. Reduce some factors well below the industry standard (to reduce cost)
  4. Create one or more new factors that the industry has never offered

My Top Tools and Ideas from Blue Ocean Strategy

If I were conducting workshops or a structured review to look for new products or services, there are two tools I would definitely want to use. These are:

  1. The Buyer Utility Map
  2. The Strategy Canvas

I also like two ideas very much. One is that of the three tiers of non-customers. This isn’t new to me and we wrote about Waterfall analysis back in 2014. Whether this method derived from Kim and Mauborgne’s work or has a different origin, I cannot tell.

But what was new to me in researching this article is the idea of Tipping Point Leadership. If you’re interested in creating organisational change, do look this up. This seems to me to be a really strong idea.

The Strategy Canvas

I really wish we had the space to go into the Strategy Canvas tool in some depth. It’s a great tool. Easy in concept, but powerful. The best I can do for you is to point you to two excellent articles. I do believe this tool can lead you to innovative product or service ideas in many business landscapes – or should I say seascapes?

  • ‘What is a Strategy Canvas?’ at the intrafocus website

  • ‘5 Proven Steps to Creating Your Own Blue Ocean Strategy’ at the Ignition Framework website

A Four-step Process for Finding Your Blue Ocean Strategy

The Blue Ocean Strategy website sets out the sequence for testing a Blue Ocean Strategy. The four steps are:

  1. Does your new idea offer buyers exceptional utility? People want something useful.
  2. Is your price accessible to a mass of buyers? Volume generates profitability.
  3. Can you deliver at a cost that creates enough profit when you sell at your chosen price? Price first, to create the market. Then determine profitability at your cost point.
  4. Can you address the barriers to the adoption of this new product or service? The bulk of buyers will resist something completely new.

If the answer is yes to all these questions, you have a viable Blue Ocean idea. Go for it!

What is Your experience of Innovative Strategies?

Have you created a Blue Ocean Strategy? Or used any of the tools?

We’d love to hear your experiences, ideas, and questions. Please leave them in the comments below.

To learn more…

Kim and Mauborgne have written two-best selling books:

  1. The original is the 2004 ‘Blue Ocean Strategy’ (US|UK)
  2. The follow-up, in 2017, was ‘Blue Ocean Shift: Beyond Competing’ (US|UK)

Our own Strategy Pocketbook is full of tips and techniques for formulating and developing a strategic plan.

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