When competition in a market is fierce, it can be difficult to differentiate your company. When this happens, companies often consider tweaking their products and/or establishing new markets in an attempt to create new demand and open up opportunities. This strategy is called a Blue Ocean Strategy and is deployed by companies who seek to create their own market instead of competing in an existing crowded market. What characterizes companies trying to establish a Blue Ocean for themselves is the simultaneous pursuit of high product differentiation and lost cost.
Examples of companies that established a Blue Ocean Strategy by targeting non-customers include Ford with the Model T series, ultimately making cars widely available, and Apple which made the personal computer accessible. With strategic research delivered by HelloInfo, a complete and holistic Blue Ocean Strategy can be created, leading your company to exist in a new market and grow market share.
Blue Ocean vs Red Ocean
In their book, Blue Ocean Strategy, Chan Kim & Renée Mauborgne coined the terms “Red Ocean” and “Blue Ocean” to describe the market landscape. While Blue Oceans refer to industries not in existence, Red Oceans represent all industries in existence today. Within Red Oceans, the industry boundaries are defined and accepted. As the market becomes more and more crowded there is greater competition, resulting in reduced profit and growth for companies in those markets. This is where Red Oceans get their name from as the market is cutthroat and ‘bloody.’
The differences between Red Ocean and Blue Ocean strategies are as follows:
Once you understand what strategy is best for your company, you can begin to take the necessary steps to establish yourself in a market.
Establishing a Blue Ocean Strategy
The creators of Blue Ocean Strategy, Kim and Mauborgne, describe the process of finding a Blue Ocean in a series of steps. Forbes comments that these steps can help a company move from the limitations of a competitive industry to greater value improvement, and eventually towards a Blue Ocean. These steps are:
- Choosing the right place to start, and constructing the right Blue Ocean team for the initiative.
- Getting clear about the current state of play. This pushes a company to understand the competitive landscape and understand how similar their strategies are to their competition.
- Uncovering the hidden pain points that limit the current size of the industry and discovering an ocean of non-customers.
- Systematically reconstructing market boundaries and developing alternative Blue Ocean opportunities.
- Selecting the right Blue Ocean move, conducting rapid market tests, finalizing, and launching the shift.
Kim and Mauborgne further suggest framing your search in what they call a “four actions framework.” This framework is meant to reconstruct buyer value elements when creating a new value curve. The four actions are four questions:
- Raise: What factors should be raised well above the industry’s standard?
- Reduce: What factors resulted from 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?
These questions should be answered at every step of creating a Blue Ocean to ensure success. Further success can come from deploying curated competitive intelligence obtained by HelloInfo. These efforts best serve the Blue Ocean Strategy in the form of groundwork to assess your company’s current market position, potential threats, and opportunities.
Pros and cons of the Blue Ocean Strategy
Before embarking on a Blue Ocean Strategy, it is important to understand the pros and cons of this strategy. The pros of adopting a Blue Ocean Strategy include:
- Avoiding saturated markets: A congested market caused by competition can cause your product or service to be passed over. A Blue Ocean Strategy will allow your products and services to be unique while remaining affordable.
- Introducing growth potential: If you create a Blue Ocean Strategy you will need to balance product or service innovation with cost and utility. This will create new value for customers, causing greater awareness of your product or service and increasing demand and growth.
- Meeting customers on their level: In a Blue Ocean, value and affordability are equal. This creates a price points that your customers can afford, ultimately reducing barriers for your customers.
However, the pros need to be weighed against the cons, including:
- Being overly ambitious: While in theory any company can pursue a Blue Ocean Strategy it is not always a simple process. Even if you have good ideas and are committed to it constraints in the real-world may limit you.
- Facing higher risk: Even if you create a unique product at an affordable price the product could be too niche for your customers. This could constrain your company and limit growth.
- Inspiring imitation: Innovation will eventually cause imitation. This can cause a Blue Ocean to become a Red Ocean and limit the positive effects of a Blue Ocean Strategy.
How HelloInfo can help
Large portions of Blue Ocean Strategy focus on understanding the market you are currently in, and what products already exist. At HelloInfo we regularly work on projects to support client product development strategies. This includes primary and secondary research to give your business a holistic view of the market while knowing how to differentiate yourself. HelloInfo aids market entry studies with tools such as:
These tools are critical in laying the groundwork necessary to create a Blue Ocean Strategy. They look at your competitors and the market as a whole to help improve your product features, understand your price positioning, and gain a strategic advantage. HelloInfo can help provide further insight through customer interviews, providing deep analysis of your customers’ wishes, pain points, and goals.
With the help of HelloInfo, if executed correctly, a Blue Ocean Strategy can lead your business into its own market, rising above your crowded competition. To learn more about how HelloInfo can support you schedule a call.