Blue Ocean Strategy: Meaning Types Examples Challenges

For example, rather than putting on the traditional “once and for all” show, Cirque mounts multiple productions based on different themes and story lines. As with Broadway productions, too, each Cirque show has an original musical score, which drives the blue ocean strategy meaning performance, lighting, and timing of the acts, rather than the other way around. The productions feature abstract and spiritual dance, an idea derived from theater and ballet.

At the same time, he did away with the clearance racks and coupons that attracted the company’s most loyal customers. Guided by the innovative spirit exemplified by Cirque du Soleil’s transformation from a street performer to a global cultural phenomenon, Blue Ocean Strategy urges businesses to transcend traditional markets. By thinking beyond existing confines, companies can unlock unparalleled growth opportunities and redefine industry landscapes. In this WOBI video, Prof. Renée Mauborgne tells us how to create uncontested market space, thus making the competition irrelevant. This exercise forces companies to examine every factor of competition, guiding leaders to discover the assumptions they unconsciously make while competing.

Value Innovation is only spoken of when companies gear their innovation activities to utility, cost and price. This means, for instance, that companies generally have to abandon the competition-based theories, such as the Generic Strategies of Porter. Similarly, although traditional circuses promoted their performers as stars, Cirque realized that the public no longer thought of circus artists as stars, at least not in the movie star sense. Not only did these create confusion among spectators forced to switch their attention from one ring to another, they also increased the number of performers needed, with obvious cost implications.

Chan Kim and Renée Mauborgne

ITunes also eliminated the market for illegal music downloading by pricing songs reasonably and creating intuitive search and navigation options. The ERRC Grid is a tool that helps companies apply the Four Actions Framework systematically. It facilitates the identification of factors to eliminate, reduce, raise, and create in order to formulate a new value proposition. The government of Malaysia introduced the National Blue Ocean Strategy (NBOS) Summit to start innovative strategies for creating a change in the society at a lower cost. The Summit questioned the idea of putting all criminals in the prison and introduced the Community Rehabilitation Program (CRP).

1. This price-minus costing, and not cost-plus pricing, is critical to arrive at a cost structure that is both profitable and hard for potential followers to match.
2. Today, one hardly talks about strategy without using the language of competition.
3. In other situations, attempts to imitate a blue ocean creator conflict with the imitator’s existing brand image.
4. Chan Kim and Renée Mauborgne are credited with introducing this concept which focuses on creating value and differentiating from competitors to gain an edge over them.

The six stages of the buyer experience cycle

Instead, Nintendo prioritized wireless motion-control gameplay that was unavailable on other systems. That’s how Nintendo was able to introduce more interactive, physical games like the Wii Sports series. The emotional appeal is how a customer feels when they use your product, whereas the functional appeal is the benefit from using the product.

What Is Blue Ocean? Definition in Markets and Characteristics

Brainstorming together can lead to a unique idea — ones you might not have thought about on your own. For example, if you create medical products that are typically targeted at hospitals and doctors, imagine the same product from the patient’s perspective and see if and how the product can be improved. They let people buy and download music online while simultaneously providing music labels with another source of income.

While most managers have a strong impression of how they and their competitors fare within their scope of their responsibility, they often fail to see the overall industry dynamics. BOS provides a four-step strategy visualization tool that serves to unlock people’s creativity. Likewise, using this path, CNN created the first real-time twenty-four-hour global news network based on the rising tide of globalization. For Southwest Airline, it could be – “The speed of a plane at the price of a car – whenever you need it.”. A regular airline with a conventional offering cannot come up with such a tagline unless there is focus and divergence.

Sometimes, you may be inside an organization where the development is stunted due to the people’s conventional way of thinking. There are government departments or ministries that try hard to satisfy the customers while trying to keep the cost low. In all these cases, adopting a blue ocean strategy is a great idea for you. The strategy provides analytic tools to shift from the idea of market competition to market creation. The blue ocean theory seems simple, but the main challenges start when you start to execute it.

Looking forward, it seems clear to us that blue oceans will remain the engine of growth. Prospects in most established market spaces—red oceans—are shrinking steadily. Technological advances have substantially improved industrial productivity, permitting suppliers to produce an unprecedented array of products and services.

Blue Ocean Strategy Framework

When the record labels approached Napster to work out a revenue-sharing model, Napster balked while Apple partnered with major music companies. In contrast, iTunes achieved sustainable success and both dominated and grew the blue ocean of digital music. First, companies discover that volume generates higher returns than it used to. For knowledge-intensive products (like software), companies bear most of their costs in product development than in manufacturing which makes volume the key. Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of a new blue ocean. Strategic groups refer to a group of companies within an industry that pursue a similar strategy.