22 Jan The Blue Ocean Strategy | Making Your Competition Irrelevant
Blue Ocean Strategy
The term is derived from the book "Blue Ocean Strategy" (Harvard Business Review Press, expanded edition, 2015), by W. Chan Kim and Renee Mauborgne. The strategy represents the simultaneous pursuit of high product differentiation and low cost, thereby making competition irrelevant
Blues Ocean companies try to outperform their rivals to grab a greater share of existing demand. ... Blue Ocean companies, in contrast, access untapped market space and create demand, and so they have the opportunity for highly profitable growth. In Blue Oceans, competition is irrelevant
Blue Ocean Strategy Explored The blue ocean strategy is business theory that suggests companies are better off searching for ways to gain "uncontested market space" than competing with similar companies. The term is derived from the book "Blue Ocean Strategy" (Harvard Business Review Press, expanded edition, 2015), by W. Chan Kim and Renee Mauborgne. The strategy represents the simultaneous pursuit of high product differentiation and low cost, thereby making competition irrelevant.
"Our study shows that blue ocean strategy is particularly needed when supply exceeds demand in a market,"
“You Need to Know About the Blue Ocean Strategy, and How To Create Your Own Market.”
The Amazon Strategy
Amazon shifted from an online retailer to a digital platform that sells practically anything
"Just think of its initial blue ocean shift in book retailing that separated it from the pack with its offering of the largest selection of books in the world, good prices, automatic confirmation of buyers' orders, its useful selection on 'people who bought this book also bought,' and firsthand reviews on what readers found useful or not in a book," Amazon isn't always successful in creating blue oceans, however. According to Mauborgne, it failed in a few instances against Zappos, eBay and Apple.
Defense Is Offense "In each of these cases, the companies Amazon went up against had all created blue oceans of their own, and whenever Amazon tried to imitate them, they failed," said Mauborgne. "The lesson here is that the best defense is offense, and the best offense … is to make a blue ocean shift and create your own blue ocean. Imitation is not the path to success, especially in the overcrowded industries most companies today confront."
Another company that created a blue ocean shift is Home Depot, which created an original value-cost frontier that led to the multibillion-dollar DIY market
"When they saw Amazon encroaching upon their space, instead of competing head-on … they doubled down on offering what Amazon could not – knowledge and advice to complete complex do-it-yourself projects such as renovating your bathroom on your own,"
Finding Blue Oceans | Four Actions Framework
To discover an elusive blue ocean, here are recommendations that businesses consider what they call the Four Actions Framework to reconstruct buyer value elements in crafting a new value curve. The framework poses four key questions:
- Raise: What factors should be raised well above the industry's standard?
- Reduce: What factors were a result of competing against other industries and can be reduced?
- Eliminate: Which factors that the industry has long competed on should be eliminated?
- Create: Which factors should be created that the industry has never offered?
This exercise forces companies to examine every factor of competition, guiding leaders to discover the assumptions they unconsciously make while competing. They can then search for blue oceans within their industries and make the shift.
Making the Shift | Having a Strong Impetus for Change
"If retailers applied it, they'd quickly discover that they all compete in the same space they have for 30 years and all are near mirror images of one another. That creates a real wake-up call, gets everyone aligned and creates a strong impetus for change."
Acknowledgements: Sammi Caramela.