When household-name automotive company Ford launched its now-legendary Model T series, most manufacturers were customizing cars to each buyer’s needs. Instead of viciously competing with other companies, find a way to work in a marketplace free of competitors. I am Nicola Zanetti, , a fervent business acceleration enthusiast and a pioneer in the field of entrepreneurial innovation. With a career dedicated to management, I am the founder of B-PlanNow® a revolutionary initiative that reflects my dedication to supporting the development and scaling of startups. My professional experience is a mosaic of entrepreneurial adventures both in Italy and internationally. I have spent significant years in China, months in Egypt and Switzerland, gaining global insight and an in-depth understanding of different business cultures.
As of 2019, Uber approximately has 110 million riders worldwide and holds 69% of the market share in the United States. Netflix is another shining star that has used blue ocean strategies to create a new market. By using BOS, businesses can soar to new heights by crafting a unique value proposition and standing out from the competition. The four actions suggested by BOS – focus, create, reduce, and raise – are designed to help businesses carve out their own market space that is inaccessible to their competitors. If you recognize an unserved market that your business can provide value to through your products and services, it may be a huge opportunity just waiting to be discovered. By pivoting to blue ocean strategy meaning address this market’s needs, you’ll go where your competition isn’t, potentially finding fertile ground in which to expand your business.
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Businesses that use BOS successfully also benefit from an even playing field, as it does not involve battling with other firms. This allows them to concentrate on creating value for their clients instead of vying for the same market share. To discover an elusive blue ocean, Kim and Mauborgne recommend considering what they call the “four actions framework” to reconstruct buyer value elements in crafting a new value curve. Here the rules of the competitive game have not yet been defined and the opportunities for growth are greater, both in profits and speed.
Customers now choose Starbucks to spend quality time and socialize over a good cup of coffee. Dyson, for example, leapfrogged the competition by eliminating the need for vacuum cleaner bags and all the cost and hassle of buying new bags8. For example, to address their financial planning, customers could buy a financial software package, hire a professional, use a mobile app or simply use pencil and paper. Chan Kim and Renée Mauborgne, the concept was published in 2005 with the release of their book Blue Ocean Strategy.
- What the company found was that many of the elements considered essential to the fun and thrill of the circus were unnecessary and in many cases costly.
- This can act as a barrier to entry for potential competitors, securing the company’s position as a market leader in the long run.
- Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of a new blue ocean.
- 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.
These trips have allowed me to weave a global network and gain a unique perspective on international business. Through its innovations, Nintendo Wii, in practice, managed to penetrate the Blue Ocean, that is, an untapped market, while others were swimming in a now very crowded Red Ocean. The factors to be eliminated are those that the industry now takes for granted and/or that no longer have any significant value (in some cases they may even have a negative impact).
How to implement the blue ocean strategy in your business
Thus, it supports the company to incur large profits and surpass the competition. We collaborate with business-to-business vendors, connecting them with potential buyers. In some cases, we earn commissions when sales are made through our referrals. These financial relationships support our content but do not dictate our recommendations.
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. Companies such as Apple, Netflix, and Ford have all sailed their own blue oceans by using Blue Ocean Strategies successfully. The first action is all about identifying customer needs and creating a new value proposition that will set your company apart from its rivals. This involves looking at existing markets to understand what customers are looking for before offering them something different – like a combination of features they can’t find anywhere else! Once you’ve identified your unique value proposition, it’s time to focus on creating a blue ocean by redefining industry boundaries and carving out your own niche in the marketplace. The Blue Ocean Strategy is a powerful and innovative approach to business strategy that focuses on creating new market spaces rather than competing in existing ones.
As the market space becomes full of providers, profits and growth are inhibited. At a certain point, products are seen as raw materials, which leads to bloody competition. For this reason, the term ‘red’ has also been assigned to such an overall strategy. This entails identifying potential customers not currently being served by the existing market and tailoring products or services to meet their needs. Incorporating Custom GPT AI into the development of Blue Ocean Strategies represents a significant leap in strategic planning.
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. And as trade barriers between nations and regions fall and information on products and prices becomes instantly and globally available, niche markets and monopoly havens are continuing to disappear. At the same time, there is little evidence of any increase in demand, at least in the developed markets, where recent United Nations statistics even point to declining populations.
What does the term “blue ocean” mean?
This strategic clarity helps mobilise resources, foster collaboration, and ensure all efforts are directed towards a common goal. Such alignment enhances efficiency, reduces internal conflicts, and creates a cohesive approach to market opportunities. With everyone in the organisation working towards a shared vision, the execution of the strategy becomes more effective and impactful. Alternative forms of entertainment—sporting events, TV, and video games—were casting a growing shadow.
At times, newly invented products can lead to self-assassination of the existing products and thus, leads to an unwillingness to interfere with the current revenue source. Uber devised a new market by the amalgamation of advanced technology and modern devices. Blue Ocean Strategy is all about devising and acquiring the uncontested market forum by spawning a new demand. Since the industries are in a state of non-existence, there is absolutely no relevance of peer comparison. The strategy bags the new demand by familiarizing unique products with advanced features that stand apart from the crowd.
Path 2: Look across strategic groups within industries:
In response, Apple launched iTunes12 which offered legal, easy-to-use, and flexible à la carte song downloads. With a collection of over two hundred thousand songs, consumers could download an individual song for as low as 99 cents or an entire album for $9.99. Similarly, Bloomberg7 found a blue ocean by shifting its focus from the IT managers to whom it sold trading software to actual traders and analysts. 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. A strategy formulated using the tools discussed thus far should exhibit three characteristics – Focus, Divergence, and a Compelling Tagline.
Think of the factors that require a lot of investment but do not generate a lot of income, or other factors that do not improve the statistics. This strategic move provides value development both for the organizations themselves and for potential buyers. Chan Kim and Renée Mauborgne and is based on a study of 150 strategic moves in the course of one hundred years and over 30 industries.
In an age where streaming movies was unheard of, Netflix entered a blue ocean by offering just that. It was able to create a new market space for itself by going beyond the conventional DVD rental market (red ocean). As a business owner, blue ocean thinking can help you differentiate your company and its products or services.
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- To gain the upper hand in the market, companies should strive to offer their customers something special – tipping point leadership – by offering them an exclusive combination of features and benefits.
- And it means denying the distinctive strength of the business world—the capacity to create new market space that is uncontested.
- And while aisle concession sales appeared to be a good way to generate revenue, the high prices discouraged parents from making purchases and made them feel they were being taken for a ride.
- By exercising fair process in the strategy formulation phase, people develop trust that a level playing field exists, inspiring voluntary cooperation during the execution phase.
- To address this, the AI system requires continual updates with the latest market data and trends.
Microsoft, for example, has been trying for more than 10 years to occupy the center of the blue ocean that Intuit created with its financial software product Quicken. Despite all of its efforts and all of its investment, Microsoft has not been able to unseat Intuit as the industry leader. Fair process is a key variable that distinguishes successful blue ocean strategic moves from those that failed. The presence or absence of a fair process can make or break a company’s best execution efforts. It outlines all the levers companies can pull to deliver exceptional utility to buyers as well as the various experiences buyers can have with a product or service. This mindset helps managers identify the full range of utility spaces that a product or service can potentially fill.
Learn how strategic business units benefit your company, with best practices to help develop a business unit that boosts long-term growth and profits. This renowned circus had to get creative during a period of crisis in the fiercely competitive circus industry. You don’t always need to invent new industries to benefit from the blue ocean strategy.
As the space gets more and more crowded, prospects for profits and growth are reduced. Products turn into commodities, and increasing competition turns the water bloody. The expression “blue ocean” refers to the unexploited potential within markets that are currently uncontested by competitors. By developing new products and services and pricing them strategically, companies can successfully enter these blue oceans and gain more market share and profits than in a red ocean.