Blue Ocean Strategy is a term coined by professors Chan Kim and Renee Mauborgne in 2005 and has become a rapidly adopted approach to achieving market leadership.
This particular marketing strategy approach splits markets into two categories: Blue Oceans and Red Oceans. Where red oceans refer to existing and ‘bloody’ competition, blue oceans refer to uncontested market space.
This blog will explore these concepts in detail.
Why Businesses Should Adopt Blue Ocean Strategy
Would you rather compete in an existing industry, offering a generic product or idea, and struggle to win customers?
Or would you rather find and operate in new markets, offer a unique value proposition, and create an uncontested market space?
The latter is what marketing strategists refer to as Blue Ocean Strategy. Think of empty oceans where there are a vast amount of opportunities to be innovative and provide a unique value proposition that sets your business apart from others.
By thinking like a blue ocean strategist, and applying this approach, small businesses can create uncontested market space and achieve growth.
What Is Blue Ocean Strategy?
Blue Ocean Strategy is a concept less explored, amongst marketing strategists and entrepreneurs however Blue Oceans have always been around.
When you think back centuries and even decades ago, many industries today weren’t in existence. For example, think about electricity, aviation, and even technology. These all arose because someone had the mindset of a Blue Ocean strategist. They recognised an opportunity to create value innovation, something that had never been done before.
Therefore, Blue Ocean Strategy explores the idea of finding business in an industry where there is no competition. Blue Oceans capture endless possibilities with a pricing strategy that focuses on delivering low cost and high value.
Businesses need to be creative through value innovation to grow demand and break away from the competition.
Why Is Blue Ocean Strategy Important?
In 2022, the Internet of Things has resulted in a plethora of new businesses competing in the marketplace. No matter the industry, technology, software and AI dominate.
Competition is fierce and many are fighting for more significant market share in industries where many businesses offer similar products and services. When this happens, it is referred to as Red Oceans.
Shifting from a Red Ocean to a Blue Ocean mindset is very important if businesses wish to value innovate and remain relevant in today’s markets. In overcrowded industries, it becomes harder to innovate therefore customers end up choosing based on price.
Blue Ocean winners on the other hand know how to break the existing value/cost trade-off
How To Apply Blue Ocean Strategy
Many businesses are choosing to make the shift to Blue Oceans, and while it can seem daunting, it does not have to be difficult.
It requires a combination of three elements.
Having the right mindset and perspective to make the shift.
A clear roadmap with the right marketing tools and channels.
Building confidence with the people who make up your business.
With all three elements, businesses can drive the process of shifting from a Red Ocean to a Blue Ocean.
The Six Paths Framework
The six paths framework was created to help shift from Red Oceans to Blue Oceans.
Each path explains how to uncover Blue Oceans by thinking outside the box. This involves looking across industry boundaries so that businesses can break away from conventional thinking, which keeps them stuck in Red Oceans.
|Path 1||Look across alternative industries||Understanding ‘substitutes’ and ‘alternatives’ to focus on how buyers trade-off across alternative industries|
|Path 2||Look across strategic groups within your industry||Groups of organisations within a similar industry that pursues a similar strategy.|
|Path 3||Look across the chain of buyers and redefine the industry buyer group||Consider other buyer groups who are directly or indirectly involved in the purchase of a product.|
|Path 4||Look across complementary products and services||Having an understanding of how a product is used before, during and after is key to finding new value that the competition doesn’t offer.|
|Path 5||Rethink the functional-emotional orientation of the industry||Understanding consumers’ purchase decisions based on an emotional or functional appeal allows businesses to strip one element to allow complete focus and value on the other.|
|Path 6||Participate in shaping external trends over time||Looking across time helps businesses gain new perspectives. Three elements require to be present: the trends must be decisive to the business, irreversible and have a clear trajectory.|
The Four Actions Framework
Another framework that can assist when creating a Blue Ocean strategy, is the four actions framework. The framework was created to reconstruct buyer elements so that new value can be created.
Four key questions are used here and the purpose of these is to challenge existing industry logic.
- Factors your industry takes for granted that should be eliminated.
- Factors in your industry that should be reduced well below the industry’s standard.
- Factors in your industry that should be raised well above industry standards.
- Factors that your industry has never offered that should be created.
The aim is to eliminate and reduce unnecessary factors and raise and create those that shape the way for value innovation.
Understanding Non-Customer Pain Points
A fundamental exercise in marketing is exploring customer pain points. Where many marketing departments fail, is by not considering the pain point of non-customers.
Non-customers hold the greatest insight into value innovation.
There are three tiers of non-customers and the framework can help businesses gain deeper insight into latent demand that can help them tap into Blue Oceans.
The three tiers do not have to be explored at once, and rather businesses can choose to focus on one at a time.
Tier 1: Soon-to-be non-customers
This first tier of non-customers is closest to your current market. They are sitting on the edge waiting to jump ship. They might purchase products and services out of necessity but in their own mindset, they do not see themselves as customers.
Tier 2: Refusing non-customers
This tier of non-customers actively chooses against your market and industry offerings. They might not see a need and so have decided to actively avoid participation.
Tier 3: Unexplored non-customers
Tier 3 customers are farthest from your market. They have never considered your products and offerings as an option and so have never enquired about it.
The key is to put yourself in the mindset of these non-customers and try to understand why they choose not to engage with your brand. What are their pain points?
Many businesses put themselves in the mind of existing customers, however, if you can think like a non-customer, this is where opportunities for Value Innovation and capturing Blue Oceans exist.
Examples of Blue Ocean Companies
Examples of Blue Ocean Companies
There are many Blue Ocean companies out there, and some you will be familiar with. The difference between some of these brands and other similarly competing ones is that the Blue Ocean brands create new demand in unexplored marketspaces.
Red Oceans on the other hand create demand by attracting existing consumers through marketing and improved products.
Netflix is a great example of a brand that reinvented the entertainment industry in the early 2000s. At this time, rental video stores were the thing. Instead of jumping on this bandwagon, they sought to create new demand.
Netflix created a new model of entertainment which involved introducing mail-order video rentals initially. However, this soon developed the streaming video platform we know it today.
Netflix creates this new demand, and now dominates this industry. Other similar brands have followed suit, but find themselves fighting in a Red Ocean where they cannot compete with Netflix.
Starbucks was the OG of the re-invented coffee shop. Despite many other coffee shops being established at the time of its introduction to the market, it offered something different.
Starbucks chose to focus on offering differentiation. Rather than just offering coffee, the brand chose to up its value proposition, and offer a wide variety of beverages to suit more than just the needs of coffee lovers. This is a great example of targeting non-customers to capture uncontested market share.
Starbucks also provided newspapers, and fast wifi networks so as to encourage coffee and other beverage lovers a cosy and inviting place to chat, and work. To that effect, Starbucks has effectively become a social venue.
More coffee shops are following suit, but Starbucks remains the original.
Is Blue Ocean Strategy Effective?
Blue Ocean strategy can be effective, however, it is not always easy for companies to implement. All key stakeholders and employees have to be onboard in order for it works.
The good news is that you don’t have to follow every single framework there is, and even focusing on small tasks such as exploring your non-customers, can begin the process of finding blue oceans.
The key is to not think about or orientate your business to that of your competitors, but rather pave a new way to create value innovation.
If marketing strategy is what are you needing help with, I provide one-on-one strategy consultations and workshops.