For those that have not read the Book – Blue Ocean Strategy – How to Create Uncontested Market Space and Make the Competition Irrelevant. Or the seminal HBR 2004 article ‘Blue Ocean Strategy‘ here is a very high level over view.
Blue Ocean Strategies are ones that capture the new and unexplored areas. They unlock new demand and make the existing competition irrelevant. The cornerstone is “value innovation”, a concept which was originally outlined in the HBR article “Value Innovation – The Strategic Logic of High Growth” (Kim & Mauborgne’s 1997).
“Red oceans are all the industries in existence today—the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.”
Kim & Mauborgne December 2008
Value Innovation is the simultaneous pursuit of differentiation and low cost, creating value for both the buyer, the company, and its employees, thereby opening up new and uncontested market space. The aim of value innovation, as articulated in the article, is not to compete, but to make the competition irrelevant by changing the playing field of strategy. The strategic move must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market.
There are four principles:
- how to create uncontested market space by reconstructing market boundaries,
- focusing on the big picture,
- reaching beyond existing demand and supply in new market spaces
- getting the strategic sequence right.
Blue Ocean Strategies Post Pandemic
The pandemic has thrown up a huge range of new challenges for companies some of these have dramatically transformed the profitability and the business realities.
Many firms will face financial distress if they continue to compete for the same markets carving up a shrinking metaphorical pie. The authors put forward that now more than ever is the time for firms to create new blue ocean strategies. Create new demand, build new revenue, generating profit and new growth.
“Blue oceans, in contrast, denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored. Like the “blue” ocean, it is vast, deep, powerful, in terms of profitable growth, and infinite.”
Kim & Mauborgne December 2008
They ask the following questions
Do you take industry conditions as given? Or do you reshape them in your favour?
- Boundaries are not fixed, previous firms created them so shape them the way that creates a strategic advantage.
- Free yourself from shared industry logic that can restrict your creative thinking and expand your mindset to what is possible and profitable.
Do you try to beat the competition? Or do you make the competition irrelevant?
- What are the factors that your customers really value and what has changed in their needs.
- How can you create an offering that your customers will love and become immediate advocates for.
Do you focus on creating and capturing new demand? Or do you focus on fighting over existing customers?
- For many industries the group of known customers is tiny compared to the potential demand outside the industry. Consider your non customers how can you build products and services that creates appeal for them.
- Competing for a large slice of an existing pie is unlikely to create profitable growth. Find creative ways to make the pie bigger or go after a new pie with offers that will attract non customers to your brand.
Do you simultaneously pursue differentiation and low cost? Or do you make a value-cost trade-off?
- It is never about one or the other. Go after both differentiate the product and create value that is not vulnerable to competitive cost erosion.
- Where markets are directly facing economic impact from the pandemic, low cost strategies become more important to stand out and potentially tap into latent demand.
Key Takeaways
- The pandemic is already showing significant changes in the market. Some industries may never come back to the same base. So plan now how to create new blue oceans for your firm.
- Markets are not fixed and strategic leaders need to widen the creative thinking to look at how the firm can create new value in adjacencies and other industries rather than fight over a share of the existing pie.
DIGEST of an article from INSEAD KNOWLEDGE How to Be a Blue Ocean Strategist in the Post-Pandemic World By W. Chan Kim, Renee Mauborgne, and Mi Ji Published: 25th November 2020 https://knowledge.insead.edu/blog/insead-blog/how-to-be-a-blue-ocean-strategist-in-the-post-pandemic-world-15626 and from Harvard Business Review Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne Published: October 2004 https://hbr.org/2004/10/blue-ocean-strategy and from Harvard Business Review Value Innovation: The Strategic Logic of High Growth by W. Chan Kim and Renee Mauborgne Published: January 1997 (updated July 2004) https://hbr.org/2004/07/value-innovation-the-strategic-logic-of-high-growth and from INSEAD Newsletter A Conversation with W. Chan Kim and Renee Mauborgne authors of BLUE OCEAN STRATEGY Published: February 2005 https://web.archive.org/web/20081203070029/http://www.insead.edu/alumni/newsletter/February2005/Interview.pdf W. Chan Kim and Renée Mauborgne are professors of Strategy at INSEAD, co-directors of the INSEAD Blue Ocean Strategy Institute, and #1 Management Thinkers in the World by Thinkers 50. They are the authors of New York Times and #1 Wall Street Journal bestseller, BLUE OCEAN SHIFT – Beyond Competing: Proven Steps to Inspire Confidence and Seize New Growth, and the over 4 million copy international bestseller Blue Ocean Strategy. For more on the authors, visit www.blueoceanshift.com.