You Can Create Another Blue Ocean Offering in Round Blue-2?

Much literature on strategy is centered around competition and addresses questions such as: How do nosotros beat the competition? How do we get amend than our rivals? How practise nosotros gain a competitive advantage? In their book 'Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Contest Irrelevant' W. Chan Kim and Renée Mauborgne challenge these conventional ideas of strategic success and debate that competition should NOT occupy the centre of strategic thinking. Instead strategy should be near the chapters to create new uncontested marketplace space by creating a leap in value for your customers. Blue Ocean Strategy presents a systematic approach to making the competition irrelevant: how does your company become out of the carmine oceans of bloody competition and into a blueish ocean of uncontested market place infinite? In this article we will summarize the ideas behind it.

Blueish Body of water Strategy past Westward. Chan Kim and Renée Mauborgne

Carmine Ocean Strategy

Cherry Oceans are described as all the industries in existence today: the known marketplace space. In Red Oceans, manufacture boundaries are defined and accepted, and the competitive rules of the game are known. In these industries, companies try to outperform their rivals to catch a greater share of the existing demand. Swimming in a Red Ocean is near beating the competition and exploiting existing need. However, as the market space gets more crowded due to increased competition, prospects for profits and growth are reduced. Hence, cutthroat contest results in nada but a bloody Red Ocean of rivals fighting over a shrinking profit pool. Often used frameworks within this line of thinking are Porter'due south V Forces, Generic Strategies and the Value Disciplines. Information technology is believed that companies should brand a clear option betwixt differentiation and cost leadership equally a strategy in order to exist better able to compete with rivals for market share.

Blue Ocean Strategy versus Red Ocean Strategy

Figure ane: Reddish Body of water Strategy versus Blue Sea Strategy

Bluish Sea Strategy

Blue Oceans, in contrast, denote all the industries not in existence today: the unknown market infinite, untainted by competition. In Bluish Oceans, demand is created rather than fought over. According to the Blue Bounding main Strategy principles, companies should not only try to compete in existing markets (Carmine Oceans), simply also detect or create new markets where competition does non nevertheless be (Blue Oceans). In these unexplored and untapped markets, there is aplenty opportunity for growth that is both profitable and rapid. In addition, competition is irrelevant because the rules of the game are waiting to be set. Where Cherry Ocean Strategy is a cypher-sum game that is all about splitting up the pie between rivals, Blue Sea Strategy is well-nigh creating the pie and/or enlarging information technology. In order to create this shift in attention from Red Oceans to Blue Oceans the authors came upwardly with a concept chosen 'Value Innovation' that allows for a simultaneous pursuit of both differentiation and depression-toll.

Value Innovation Blue Ocean Strategy

Effigy 2: Value Innovation

Value Innovation

Dissimilar conventional approaches towards strategy, Chan Kim and Mauborgne take put the customer, not the competition, at the core of strategy. In their strategic logic they place equal emphasis on value cosmos and innovation: Value Innovation. The combination of these two make sure that innovation is not just engineering science-driven and futuristic, simply keeps in mind what is actually adding value to customers and what not. Value Innovation occurs but when companies align innovation with utility, toll and cost position . This means that companies should carelessness the commonly accepted 'value-cost merchandise-off' dogma of competition-based strategy (like Porter's Generic Strategies) which states that companies need to make a pick betwixt differentiation and low cost. Those that seek to create Blue Oceans pursue differentiation and low toll simultaneously: it is about driving costs downwardly while simultaneously driving value up for buyers. Improving utility and price will incease Heir-apparent Value, while enhancing the toll construction will reduce the costs. Together, they will allow for Value Innovation that benefits both the customers and the company. In lodge to observe how Value Innovation can be accomplished the The Strategy Canvas is being used.

Strategy Canvas Cirque du Soleil

Figure iii: Strategy Canvas (Example: Cirque du Soleil)

The Strategy Canvass

The Strategy Canvas serves two purposes: The first one is to capture the electric current land of play in the known marketplace space i.east. identifying what factors electric current players in the industry are competing on. The resulting 'manufacture value curve' is therefore a good representation of what aspects competitors are currently focussing on and what kind of value buyers are receiving (see Figure iii for an example). The 2nd purpose of the Strategy Canvas is to visualize how to refocus from competitors to alternatives and from customers to noncustomers of the industry. This basically means that each of those factors is being re-examined: what factors are not so valuable for customers and can therefore exist reduced or eliminated, which in plough would decrease costs? And what factors should exist raised or created in social club to lift buyer value or create new demand? With the aid of the Four Deportment Framework (Figure 4) and the Eliminate-Reduce-Raise-Create Grid, a new value curve tin be drawn within the Strategy Canvas that breaks away from the manufacture value curve thereby creating a blue ocean. Note that while cartoon a new value curve, both differentiation and low toll have been taking into account.

Four Action Framework Blue Ocean Strategy

Figure iv: Four Activity Framework (Eliminate-Reduce-Raise-Create)

Instance: Cirque du Soleil

To illustrate their ideas, Chan Kim and Mauborgne used several real-life examples in their book. Cirque du Soleil is ane of those examples they used to testify the relevance of Blue Bounding main Strategy. How did Cirque du Soleil manage to go a successful and prominent role player in the declining circus industry? While other circuses were focusing on benchmarking similar traditional circuses in lodge to steal marketplace share from a shrinking demand pool, Cirque du Soleil reinvented the circus experience by eliminating and reducing factors that were costly and didn't add much value to customers anymore. They for example quit using animals during their shows. Autonomously from the increasing public discomfort people had with the apply of animals, it was also very expensive to feed, motion and train animals for the bear witness. Eliminating this gene solitary was therefore a massive improvement in Value Innovation. In improver, Cirque du Soleil wanted to elevate the customer feel by focusing on adults likewise instead of the usual focus on kids. They therefore borrowed elements from Broadway shows in club to make the shows more theatrical and magical. Funny enough, because of these changes Cirque du Soleil was able to strategically raise the prices of their tickets to friction match those of the theater industry. Through both differentiation and low-cost Cirque du Soleil jumped out of the Red Bounding main of the circus industry and created a new Blue Bounding main concept that was never seen earlier.

What's next in the BOS-process?

Of grade, visualizing the industry value bend is simply the starting point of strategic repositioning. Once a blue body of water is discovered, direction must clearly formulate the Blue Sea Strategy and take the actual actions to implement the new strategy. Chan Kim and Mauborgne have therefore constructed more frameworks that can help with this process like: the Six Paths Framework, the Three Tiers of Noncustomers, the Heir-apparent Utility Map and the Four Hurdles of Strategy Execution. For the scope of this article we will non go into explaining all of these frameworks. More info on those frameworks and Blueish Ocean Strategy in full general can exist found through the references beneath.

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