Blue Ocean strategy
Blue ocean strategy is about creating new markets to escape competition.
The blue ocean is big, open, and empty - an ideal opportunity space for businesses. This is the premise of blue ocean strategy
Creating blue oceans can:
Blue oceans are markets that haven’t been created yet.
Rather than competing directly in a crowded market, or red ocean, blue ocean strategy advocates for using value innovation to create a new market with no competition.
The new market doesn’t need to be entirely unique. Similar to re-segmenting a market, a new customer segment can be created in an existing market, such as by:
Creating a a new market creates a “blue ocean” of opportunity. Companies building a blue ocean are creating a previously untapped market without competitors - at least initially. This means that blue ocean companies also need to create customers since they don’t exist yet.
Blue ocean strategy is extremely lucrative. Blue ocean launches account for just 14% of launches, but 61% of profits. This is according to the “Blue ocean strategy” study by Kim, WC & Mauborgne, R in 2015 published by Harvard Business School publishing. Contrast that with the 86% of launches categorized as red ocean that are generating only 39% of profits.
Companies with focused strategies eliminate or reduce emphasis on some factors of competition compared to the rest of their industry. Increasing emphasis on some factors and cutting costs elsewhere is an important element of value innovation.
To create a blue ocean, companies must move beyond the competition-based strategies of red oceans. Tools like the Strategy canvas and Four Actions framework can help.
Blue ocean strategy is about creating new markets to escape competition.
Crowded markets where customers have many options to choose from, resulting in cutthroat competition.
Value innovation is how companies offer dramatically higher value at lower costs, escaping competition.
The groups of people a business aims to serve.
Helps identify which factors a business should eliminate, reduce, raise, and create. Typically used with a strategy canvas.
The factors that companies/products within an industry typically compete on to provide value to customers.
An analytical tool that shows how much emphasis companies place on value areas in their industry.