Business is tough! When you start a business, you should find out what the competition is doing! To gain market-share you have to beat the competition! To be successful you have to offer a better product at a lower price offering better service! – Sounds familiar? We all know this. Business books are full of it. But is this really the way for a company to be successful, in a time when everything seems to be upside down? Can it not even be dangerous to do what competitors are doing, just trying to do it better?
Markets, products and customers are changing today faster than ever before. Who still thinks that phone calls overseas have to be expensive? How much do we have to pay for social media? Can you publish a book yourself today? Hasn’t Amazon opened a store where you can leave with the product without payment?
One way to be successful in today’s marketplace is to not to fit in or stick out of the competition, but to be different. Instead of butting heads with other companies, eliminate the competition by doing what nobody else does. Create new demand for products and services that only you offer. Sounds difficult? It is, but wait, there is help.
W. Chan Kim and Renée Mauborgne developed a strategy to maneuver around the competition and sail in untapped ocean of new markets. Whereas other companies fight in cutthroat competition that turns the ocean bloody red, companies following this strategy may find calm blue oceans to sail in. That’s why it’s called Blue Ocean strategy
How does this work?
The core of the strategy is called “Value Innovation”, a process that saves costs by cutting out factors the industry competes on and on the same time lifting the buyer’s value by creating new elements that have never been offered before. To determinate these factors and elements, there is a tool set that helps you walking through the process. One company that has successfully implemented the Blue Ocean Strategy is IKEA.
Here are the basic steps:
Reconstruct Market Boundaries
“Companies must break out of the accepted boundaries and look systematically across them to create blue oceans. They need to look across alternative industries, across strategic groups, across buyer groups, across complementary product and service offerings, across the functional-emotional orientation of an industry, and even across time”.
Kim and Mauborgne (2005)
Reach Beyond Existing Demand
Companies have to focus on what their customers have in common to maximize their markets. Doing so they can reach out to new customers, which were not part of the existing demand. Non-customers are in the focus of this marketing strategy instead of existing customers only.
Overcome Key Organizational Hurdles
“In any organization, fundamental changes can happen quickly when the beliefs and energies of a critical mass of people create an epidemic movement toward an idea.”
Kim and Mauborgne , 2005.
Build Execution into Strategy
“A company is everyone from the top to the front lines. And it is only when all the members of an organization are aligned around a strategy and support it, for better or for worse that a company stands apart as a great and consistent executor.”
Kim and Mauborgne (2005)
Get the Strategic Sequence Right
Buyer Utility: Is there exceptional buyer utility in your business idea?
Price: Is your price easily accessible to the mass of buyers?
Cost: Can you attain your cost target to profit at your strategic price?
Adoption: What are the adoption hurdles in actualizing your business idea? Are you addressing them upfront?
Result: A commercially viable blue ocean idea
Focus on the Big Picture, Not the Number
Companies should listen to the customers and make the strategy map as visual forms, which could open the creativity of employees and create value together.
Do you think that could work for you to create your Blue Ocean?
- Blue Ocean Strategy; W. Chan Kim and Renée Mauborgne; 2005
- Use value innovation to create competitive advantages in Blue Ocean; Lu Chaoren and Apinya Thawatthatree; 2011