The blue ocean strategy is a new market space that has little to no competition. A blue ocean offers untapped opportunities for an enterprise to innovate new services or products. This strategy focuses on creating new demand and generating growth, rather than competing in existing markets.
One famous example of the Blue Ocean Strategy is Cirque du Soleil.
Before Cirque du Soleil, the circus industry was characterized by traditional, animal-centric shows targeted mainly at children and families. Cirque du Soleil created a new market space by combining elements of traditional circus with theater, dance, music, and high artistic performances. This appealed to a broader audience, including adults and corporate clients, who were willing to pay higher prices for a unique entertainment experience.
By creating this new market space, Cirque du Soleil was able to differentiate itself from traditional circuses and eliminate direct competition. This allowed them to command higher prices and achieve profitability in an otherwise stagnant industry.
Market creation: The creation of a new market is possible when you expand something rather than what it normally is. It is to enlarge a pre-existing market or introduce a product/service to an entirely new segment. For example, the market for digital music players and downloads was formed by Apple's iPod as well as iTunes.
Value innovation: To find a blue ocean, a company has to think outside the box of how value is typically generated in their industry. Value Innovation is all about coming up with a leap in value you present a unique combination of factors that are different from what is obtained in the industry norm. Cirque du Soleil changed people’s view about circuses by making high-quality performances which led to attracting new fans.
Demand creation: An enterprise has to reach beyond the existing industry demand to identify new customers. Demand Creation identifies and targets new customer segments or needs that are not catered for. Airbnb created a demand for short-term rentals by offering a platform for individuals to rent out their homes.
Approach: To get the strategic sequence right, a business must understand the basics of how to create and capture blue oceans. When you focus on these principles, you can align value, profit, and people.
Align value, profit, and people to create and capture Blue Oceans. Offer unique value propositions, ensure profitability, and engage stakeholders in it. This strategic sequence may result in sustainable growth and competitive advantage
A red ocean is a conventional, known market universe. The industry operates by established rules, and all the players are competing for the same set of customers. Everyone is trying to get a greater share of the market. To get ahead in red oceans, businesses have to be more cut-throat and aggressive than their peers. Examples of companies in the Red Ocean market are McDonald’s and Burger King.
On the other side, when you enter a blue ocean, you stop competing and start innovating. Instead, you’re looking for an untapped market space. You’re trying to create a new marketplace and because you’re not up against other businesses, you have the potential for much higher profits. Finding a blue ocean renders your competition irrelevant – you’re providing a new product or service outside the existing market boundaries.
Making a blue ocean shift in your organization might take time, but it doesn’t have to be complicated – it’s simply about moving away from the existing market to creating a new market. Use these tips to guide your company’s strategic shift:
Don’t separate strategy and execution
When a leadership team creates a new business strategy and simply hands it off to managers and employees for execution, it often falls short of creating a blue ocean. To truly innovate and find new market opportunities, you need an iterative approach that involves input from everyone in the organization. This diverse range of perspectives can help uncover unique insights and lead to the discovery of untapped markets.
Focus on storytelling, not numbers
When it comes to shifting to a blue ocean strategy, getting buy-in from stakeholders and motivating your team can be challenging. People tend to stick to what they know and may be hesitant to take risks with a new business approach. While financial reports can make a case for change, storytelling is often more persuasive.
To get your team on board, provide them with firsthand reports of operational issues and growth opportunities. Instead of relying solely on survey data, share qualitative customer feedback that tells a compelling story. Once your colleagues are on board, you can start shifting towards a blue ocean mindset throughout the organization. This shift not only helps you implement your strategy effectively but also positions you to seize new opportunities in the future.
The real-world examples of companies that used the blue ocean strategy and experienced growth in their field are Netflix and AirBnb.
Netflix
In today’s era, all of us must be aware that Netflix is a popular subscription-based streaming service provider and had started competing in the DVD rental and sales industry. With the blue ocean strategy, Netflix wanted to satisfy customers’ needs and began by making movies or films online and completely excluding sales at physical stores.
Netflix made it comfortable for customers and provided a fantastic list of movies available online. They also created subscription-based monthly plans and an algorithm to understand users’ preferred movies and shows. Its main goal was to make movies available online so users do not have to leave their homes to buy or rent a DVD. Netflix also gave tough competition to Blockbuster, which was a leading DVD rental company in the 19’s. This company was a superhero of its time but with the innovative approach of Netflix in the year 1997, the concept of DVD rentals came to an end.
Airbnb
Airbnb connects travelers and renters around the world with both affordability and value. Airbnb’s strategy includes process innovation where they don’t own any properties but provide customers and sellers with a platform through which they can serve both parties.
The company’s only goal was to create amazing accommodations for their customers at the best possible price. With the blue ocean strategy, they created a site that listed various places that could be rented by the customers. Airbnb created innovation in the hospitality and hotel industry, which never existed prior, which became successful and advantageous to hosts and travelers.
The blue ocean strategy comes into play when there's more supply than demand in an industry or market. It's not about creating new products; it's about offering consumers something more reasonable and valuable, which can lead to a profitable business.
This approach aims to build sustainable and profitable frameworks, creating a whole new market with new customers. It's a strategy that can make a business successful, profitable, and truly unique within its industry.
