Blue Ocean Strategy is a business concept and strategic framework introduced by W. Chan Kim and Renée Mauborgne . How to Create Uncontested Market Space and Make the Competition Irrelevant,” published in 2005. The strategy is to help organizations break free from fierce competition in existing markets (known as the “Red Ocean”) and create new markets with little or no competition (known as the “Blue Ocean”).
“Red Ocean” scenario, companies compete in crowded markets where they fight for market share, often resulting in cutthroat competition, price wars, and shrinking profits. “Blue Ocean” represents untapped market space where there is little or no competition, allowing companies to capture new demand, create new value for customers, and realize sustainable growth.
Instead of focusing solely on beating the competition, companies should focus on value innovation, which means creating new value for customers while reducing costs. This involves offering a unique combination of product/service features that meet customer needs in a novel way.
The authors propose six different paths for companies to explore new market space: look across industries, look across strategic groups, look across the chain of buyers, look across complementary product/service offerings, look across functional/emotional appeal to buyers, and look across time.
Companies are encouraged to consider four key questions to reconstruct their value proposition and break away from industry norms. (a) Which factors should be eliminated? (b) Which factors should be reduced? (c) Which factors should be raised? (d) Which factors should be created?
The strategy canvas is a visual tool used to compare a company’s value proposition with that of its competitors. It highlights areas where the company can differentiate itself and create a Blue Ocean.
Blue Ocean Strategy emphasizes the importance of execution in turning a Blue Ocean idea into a successful reality. It requires aligning the organization and its processes with the new strategy and staying committed to the pursuit of differentiation.
Blue Ocean Strategy principles include Cirque du Soleil, which transformed the traditional circus industry by blending elements of theater and circus, and Nintendo’s Wii gaming console, which attracted non-gamer by introducing motion-based game play.
Blue Ocean Strategy has been widely embraced by businesses seeking to innovate and create sustainable competitive advantages by exploring new market spaces and avoiding direct competition.
Overall, Blue Ocean Strategy offers companies a systematic approach to breaking away from the competition, creating new market space, and achieving sustainable growth and profitability. It provides a road map for companies to differentiate themselves and become market leaders by offering value that stands out in the eyes of their customers.