Strategic Options: The Blue Ocean Strategy

“There exists limitless opportunities in every industry. Where there is an open mind, there will always be a frontier” Charles Kettering

 

 

 

 

 

 

 

 

 

 

 

 

What is the Blue Ocean Strategy all about?

To understand what the Blue Ocean Strategy is all about, we make a comparison between a red ocean and a blue ocean.

 Red Ocean

  • With a red ocean strategy, there is cutthroat competition. This means that the water is bloody red
  • A red ocean focusses on the existing market space
  • The industry boundaries are defined and accepted
  • The growth, growth potential, revenue and profits are restricted

Blue Ocean

  • Companies that adopt the blue ocean strategy focus on new market space
  • The companies expand or go across industry boundaries
  • The competition is irrelevant in the blue unchartered water
  • There is significant opportunity for some lucrative profitable growth

Blue Ocean Strategy: Costs and Buyer Value

Costs

  • Under the blue ocean strategy, one of the objectives is to drive costs down. The cost structure is lowered through the elimination and reduction of factors the industry competes on but buyers do not value highly
  • In terms of revenue, the high sales volume will be an outlook of economies of scale

Buyer value

  • The simultaneous pursuit of differentiation creates superior buyer value and low costs
  • Buyer value is increased by raising and creating elements the industry has never offered

The key principle: To reach beyond existing demand

Engaging the 3 tiers of non-customers

Tier 1

  • Engage soon to be non-customers
  • Engage customers in search of better more superior solutions

Tier 2

  • Engage non-customers that are aware of but do not use your industry offerings

Tier 3

  • Engage non-customers that have never thought of your market’s offering as an option
  • Engage “unexplored” customers who have not been targeted or thought of a potential customers by any player in the industry

Rather than competing for a share of a contracting market, value innovators stimulate the demand side of the economy.

When should the blue ocean strategy be used?

The best situations

  • Leadership is committed to investing in innovation for profitable growth and significant cost structure reduction
  • The core business or entity is performing well
  • The strategic, future-focused opportunities are not sacrificed to short-term priorities
  • The leadership embraces new approaches and non-incremental thinking
  • The leadership believes in the need for a well balanced portfolio of offerings/ business tied to different growth strategies

 

Using the Blue Ocean Strategy for business development 

Blue Ocean Strategy

 

The 4 Step Blue Ocean Strategy Process

Blue Ocean Strategy