What is Blue Ocean Strategy and How It Can Help Your Business

In the modern cut-throat environment of the corporate world, every firm competes to gain market share. This leads to a very saturated market where pricing pressure can cause a grave threat to a firm's operation. In their 2004 bestseller book titled 'Blue Ocean Strategy,' INSEAD professors Renée Mauborgne and W. Chan Kim speak about the strategy where entrepreneurs and organizations try to create new markets to make the competition irrelevant. This article will analyze the Blue Ocean Strategy and try to understand how you can use it to benefit your business. 

What Is Blue Ocean Strategy?

The Blue Ocean strategy refers to creating a market with either no competition or very little competition for a particular product. This strategy looks for those businesses in which very few firms operate, and hence, there are no pricing pressures. This strategy is not limited to any company and can be applied across businesses and/or sectors.

Red Ocean and Blue Ocean

Contrary to the concept of the Blue Ocean Strategy, we also have the Red Ocean Strategy, which refers to the existing or current industries. The present market is already filled with hundreds of similar products, and it is to this competition that the name 'red ocean' is applied. Such markets have boundaries and rules that are well-defined and accepted by businesses and their consumers. 

While the Red Ocean Strategy focuses on gaining a competitive advantage through low prices and better products, the Blue Ocean Strategy focuses on innovation. Another critical difference between these strategies is that while growth is limited in the already crowded Red Ocean, Blue Ocean tries to move past the prevailing industry structures and explores new markets.

Blue Ocean Strategy Examples

Many popular and highly successful companies have adopted the Blue Ocean Strategy, and the results are for all of us to see.

Uber

Before 2009, people had to rely on taxis as a private mode of transportation. Uber came into existence because of the stagnant taxi industry and its multiple shortcomings. Uber's founders understood the need for a personal transportation service where the focus would be on traditional necessities like customer trust and modern advancements like location tracking. Additionally, Uber looked for drivers willing to provide on-demand rides instead of purchasing vehicles. As a result, Uber has more than 19,000 employees and annual revenues of over $11 billion. 

iTunes

Upon its introduction, iTunes not only solved the industry's problem of illegal downloads but also addressed the demand for digital, a la carte songs. It introduced a new category of music sales where consumers could buy single songs, and independent artists could benefit directly. To date, it remains a market leader and the driving force behind the growth of digital music.

Netflix

There was a time when Netflix was considered a minor in front of the video rental giant, Blockbuster. However, instead of competing, Netflix reinvented the game by creating an entirely new online rental service. Its monthly payment model also addressed two significant shortcomings of Blockbuster customers, namely, late fees and returned deadlines. Initially, they adopted this strategy with DVDs, but due to their constant innovation, they quickly turned to the modern-day streaming service. Today, they also produce original content apart from streaming popular movies and shows.  

Read Also: Netflix Making Binge Watching Possible

How Can It Help Your Business?

After going through some very popular and successful examples of the Blue Ocean Strategy, let us look at how it can help your business.  

Understand Your Situation

Before introducing a new product or service, you must understand the current trends in your industry. You must analyze every positive and negative aspect of the existing product or service.

Identify Opportunities

You must also try to identify the existing problems within your industry. Also, look for alternate targets and creative methods to solve current customers' problems. You can analyze your company's strengths and competitors to identify new ideas.

Offer Something New

Now that you are aware of the problems within your organization, you can focus on either modifying or creating entirely new solutions in the form of fresh products and services. While you risk alienating your existing customers, you can look for complementary services to help retain your high-value customers.

Try Out New Products

Before launching your products, you can also create prototypes under the Blue Ocean Strategy. These prototypes could be reviewed by focus groups or on social media to understand whether your customers would approve of them. This feedback must be taken seriously as it will dictate your strategy.

Promote New Services 

Now that you are ready with the product, it is time to promote it. To build brand awareness, you can create marketing campaigns based on customer segmentation and market research. Your marketing campaign must be designed so that even the non-customers are informed about your products to boost your sales.

If you can solve customers' existing problems innovatively, you will not have to be concerned about competing in the rat race. Implementing the Blue Ocean Strategy and executing it flawlessly will help you capture most of the market.