The key to exceptional business success, Kim and Mauborgne say, is to redefine the terms of competition and move into the blue ocean, where you have the water to yourself. The goal of these strategies is not to beat the competition but to make the competition irrelevant. The blue ocean strategy might sound new, but businesses have been successfully using it for quite some time — even before Kim and Mauborgne named the approach. The blue ocean strategy represents the simultaneous pursuit of high product differentiation and low cost, making the competition irrelevant. This is precisely what the blue ocean strategy suggests, though household-name brands used this approach long before a 2004 book gave it a name. We’ll explore how creating your own market has helped many businesses grow and share how your business can also benefit.
What is the Blue Ocean Strategy? Definition, Examples and Framework
Up until then, the outdoor advertising industry was about billboards (usually installed on city outskirts) and transport advertisement that exposed people for a very short time to get influenced by advertisements. By offering a golf club with a large head, it converted noncustomers of the industry into customers. Even the existing customers, who took the norm for granted were pleased with the new offering.
Potentially even more damaging than employee disaffection is the resistance of partners who fear that their revenue streams or market positions are threatened by a new business idea. Openly discussing the issues with partners and convincing them to see the value in the shift is equally crucial to ensure business co-operation. Simplicity, fun and image, and environmental friendliness are self-explanatory. A product must reduce a customer’s financial, physical, or credibility risks. It must also offer convenience by being easy to obtain, use, or dispose of. For example, for a very long time, tooth whitening was a service provided exclusively by dentists and not by oral care consumer-product companies.
Netflix as an example of BOS
With this fresh approach providing an exclusive value proposition for customers, Netflix was able to capture a large market share and become the top streaming service provider in the world. In conclusion, BOS aids businesses in increasing their profits by exploring new markets, tapping into untapped ones, crafting a one-of-a-kind proposition, and focusing on cost efficiency and differentiation. Depending on your initiative and strategy execution, you can leave your competitors in the dust and capture a large market share. You can use Miro to collaboratively build, visualize, and optimize your blue ocean frameworks online. The Six Paths Framework is another option to create a blue ocean business model.
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Because blue ocean strategies represent a significant departure from red oceans, it is key to address adoption hurdles up front. Their analysis covering 108 companies showed that 14% of the launches that aimed at creating blue oceans contributed to 38% of the revenue and 61% of the total profits. Business leaders with innovative products and services who can identify blue ocean markets have endless opportunities. Test your ideas with potential customers to ensure market traction and refine your strategy based on feedback. Conduct market research, focus groups, and pilot programs to validate the demand for your innovative offerings and gather insights for refinement.
A typical example of the blue ocean strategy is the case of Cirque du Soleil, a Canadian entertainment company that created a new market and took away the existing competition. This resulted in revolutionary success for the company, as demonstrated by its impressive track record. By understanding the meaning of the Blue Ocean Strategy and following the key steps, businesses can achieve long-term success and profitability. Netflix is another shining star that has used blue ocean strategies to create a new market.
To create their own market space with their own unique value proposition, companies need to construct a strategy canvas. This involves examining the existing market space, redefining industry boundaries, targeting their desired audience, and determining how much it will cost to provide this value proposition. In a blue ocean, your product or service is the first of its kind, making the competition irrelevant. Much like the unexplored ocean, this marketplace has no set rules, is vast, and has a high potential for profitable growth.
The blue ocean strategy, also known as Value Innovation, is a method where companies enter new, competition-free blue ocean strategy meaning markets by developing an innovative concept. Chan Kim and Renée Mauborgne, who use the metaphor of “blue oceans” to differentiate from “red oceans”, which are characterized by fierce market competition. Chan Kim and Renée Mauborgne that encourages companies to create new market spaces, making competition irrelevant. It focuses on innovation, value creation, and differentiation to attract untapped customers and grow the market.
- Embrace Blue Ocean Strategy to navigate these uncharted waters, where creativity converges with business acumen.
- Blue ocean consists of the industries which are yet to be created and promises increased profit and growth in a healthy way.
- The authors were co-directors of the INSEAD Blue Ocean Strategy Institute.
- This assists businesses in maximizing profits and expanding their market share.
- For this reason, the term ‘red’ has also been assigned to such an overall strategy.
- In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.
As a result, any new company trying to launch a video subscription model will find itself facing a red ocean rather than a blue one. Blue ocean is an entrepreneurship industry term created in 2005 to describe a new market with little competition or barriers standing in the way of innovators. The term refers to the vast “empty ocean” of market options and opportunities that occur when a new or unknown industry or innovation appears.
As a result, organizations are required to choose between differentiation and low cost. Blue ocean strategy works by offering things of greater value at a low price. The goal is a shift from competing in the existing crowded market to creating a new market space that is beyond the competition.