If you're anything like me, you probably have at least ten different business ideas swirling around in your head at any given time. But how do you know when you're onto something big, when to take that leap, or even how to come up with a game-changing idea in the first place? I recently read Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, and I found so much value in its insights that I couldn’t resist sharing some key takeaways.
Many industries are currently plagued by oversupply and fierce competition. With the rise of globalisation and the shift toward online purchasing, it’s no longer enough to simply compete. Consumers are overwhelmed with choices, making it increasingly difficult for businesses to stand out.
“IT’S NOT ABOUT COMPETING FOR MARKET SPACE, IT’S ABOUT CREATING IT”
To thrive, you must look beyond existing market boundaries, seeking out new, untapped opportunities. The only way to truly outpace your competition is to stop trying to beat them at their own game. Instead, focus on innovation—creating something so unique that the competition becomes irrelevant. Rather than trying to do what everyone else is doing, but 1% better, the goal is to identify what hasn’t been done yet and do that.
The roots of traditional corporate strategy are tied to historic military tactics. It's even evident in the language we use, with Chief Executive Officers leading their troops from their headquarters. Accepted strategy typically involves confronting an opponent and battling over market share. What often ensues is a drawn-out, costly struggle where neither side gains significant ground. History has shown us that wars, whether on the battlefield or in the boardroom, can be devastating for everyone involved.
With advancements in technology, globalisation, and the pressures of price wars and shrinking profit margins, innovation is no longer a luxury—it’s a necessity. Otherwise, you risk joining the 90% of small businesses that fail within their first few years.
But innovation is difficult, risky, and uncertain—right?
Enter Mauborgne and Kim’s Blue Ocean Strategy, a blueprint for discovering, creating, and capitalising on new market space.
WHAT IS THE BLUE OCEAN STRATEGY?
The Blue Ocean Strategy is a roadmap for entrepreneurs, innovators, and businesses of all sizes looking to escape the cutthroat competitive market (Red Ocean) and unlock new market space through innovation (Blue Ocean). In today’s hyper-competitive environment, the key to success isn’t just doing what others are doing—but slightly better. It’s about doing what others haven’t thought of yet.
At the heart of the Blue Ocean Strategy is the concept of value innovation. This approach involves creating a significant leap in value for buyers while simultaneously opening up new, uncontested market space. The strategy encourages pursuing both differentiation and low cost simultaneously, which ultimately leads to the discovery of "Blue Oceans".
Take Uber, for instance. For a young, tech-savvy generation, traditional taxis felt expensive, inconvenient, and lacked the on-demand nature we’ve come to expect from services. By focusing on people-first infrastructure and tech innovation, Uber created a Blue Ocean—a cost-effective, on-demand rideshare service that has revolutionised the transport industry.
Uber created value for both riders and drivers. Giving riders the opportunity to book transport wherever and whenever they wanted, with speedy turnarounds and low costs with drivers already in the area.
For drivers, the value resides in the ultimate flexibility of the platform. They can set their own hours, work as little, or as much, as they desire, and the platform very low barriers to entry. Drivers aren't required to have qualifications, interviews, or other traditional obstacles (this is particularly valuable for low socio-economic or otherwise marginalised groups that struggle in the labour market).
RED OCEANS Vs BLUE OCEANS
The authors differentiate between “Red Ocean” and “Blue Ocean” business strategies:
Red Oceans:
- Compete for existing market space.
- Fight to outperform the competition.
- Exploit existing demand.
- Make value-cost trade-offs.
- Align the organisation with a strategic choice of differentiation or low cost.
Blue Oceans:
- Create new market space.
- Render competition irrelevant.
- Create and capture new demand.
- Break the value-cost trade-off.
- Align the organization in pursuit of both differentiation and low cost.
PATHS TO THE BLUE OCEAN STRATEGY
Mauborgne and Kim outline six paths to discovering blue oceans:
1. Look Across Alternative Industries:
Different products, services, and software can serve as alternatives—and therefore competitors. For example, consider how financial software, accounting books, and accountants all vie for the same customer base. Similarly, restaurants and cinemas, while vastly different, both offer a fun night out.
2. Look Across Strategic Groups Within Industries:
Even within an industry, there are different strategic groups. Luxury cars and budget cars, for instance, cater to distinct segments. However, innovation can occur by bridging the gap—think of at-home exercise programs bridging the gap between upscale gyms and the people who don’t regularly engage in intentional exercise.
3. Look Across the Chain of Buyers:
Traditionally, businesses target a specific group—whether end-users (for personal items like fashion and home goods), or corporate buyers (for wholesale items like office supplies and software). But by questioning these conventional definitions of target buyers, companies can unlock new value. For example, Canon’s development of small desktop copiers shifted their target from corporate purchasers to individual users, creating a new market.
4. Look Across Complementary Products and Services:
Few products or services exist in a vacuum; most are influenced by others. Consider the entire customer journey—what happens before, during, and after your product is used? By addressing these touchpoints, you can uncover opportunities to create new value.
5. Look Across Functional or Emotional Appeal to Buyers:
Products and services rarely appeal solely to logic or emotion; it’s usually a mix dictated by past competition, which has conditioned consumers to expect certain things. Challenge the functional-emotional orientation of your industry to carve out new market space.
6. Look Across Time:
“All industries are subject to external trends that affect their businesses over time” the authors note. Consider the rise of the internet or the global movement toward sustainability. Looking at these trends with a forward-thinking perspective can reveal opportunities. While many companies simply evolve incrementally to keep up, true innovation often emerges from those who anticipate how these trends will shift customer values and behaviours.
By identifying inevitable changes (or those with a high likelihood of persistence), you can then explore how these trends will affect people’s lifestyles and values, leading to the discovery of blue oceans.
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