Why is Blue Ocean Strategy an evergreen for shifting business models and new product development?

Published in 2005 by INSEAD professors W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy book has become a global phenomenon, as it has sold in over 3,5 million copies and was translated into 44 languages.

Thy hype over the new attitude on competing and the idea of creating new markets of so called noncustomers was extremely strong for a few years. But it’s gone. Today, marketers, trainers, entrepreneurs and business people in general have found a new hype – Alexander Osterwalder’s Business Model Generation and Value Proposition Design.

While it is out of question that the tools created by Osterwalder (and 470 practicioneers from 45 countries as the book was co-created) are very useful and make thinking about business models much less complex, I believe that Blue Ocean Strategy can still greatly support thinking about new products and businesses as it makes it easier to see things from other perspective.

Blue Ocean strategy quick guideline

From the strategic point of view, currently most of the sectors (if not all) are characterized by strong competition as companies create products and services for nearly the same customer segments. This means difficulties not only in sales, but mostly in maintaining high customer retention. Those markets are called red oceans – competing on them is tough and margins are getting lower.

What companies should focus on is finding (or creating) blue oceans. Blue ocean is an uncontested market space with a high potential of profits as new demand can be created and captured.

Red vs Blue Ocean
Source: https://www.blueoceanstrategy.com/what-is-blue-ocean-strategy/

Well, it sound perfect in theory, but what are the tools to find so called blue oceans? There are many, but frankly speaking just one is enough to work on the business idea and workshop it all over with your coworkers, agencies or even potential customers. This one tool is called Four Actions Framework and the results of working on it can be mapped on Strategy Canvas.

Four Actions Framework focuses on assumptions and standards in the market you want to compete on. There are always some sine qua non standards that are same for every (or almost) competitor on the market.

Four Actions Framework deals with this standards in four ways:

  • Raise – find factors that should be raised above industry standards
  • Eliminate – find factors which industry has long competed on that should be eliminated
  • Reduce – find factors that should be reduced below industry standards
  • Create – find factors that should be created, that the industry has never offered
  • Four Actions Framework
    Source: https://www.blueoceanstrategy.com/what-is-blue-ocean-strategy/

    After having analysed the industry and possibilities of changes, the modifications should be mapped on Strategy Canvas to see how it differentiates over competition.

    Strategy Canvas
    Source: https://www.blueoceanstrategy.com/what-is-blue-ocean-strategy/

    Very often, there will be more than just one curve for the competition. Probably, sometimes there will be plenty of them. To start with an example, take a look on a yellow tail wine brand, which has successfully entered the wine market in USA (you can find deeper analysis of their actions here)

    What yellow tail has done was eliminating ATL ads, reducing the pressure on prestige and heritage of winery as well as reducing the choice of wines. They raised the price comparising to low-end competition. And they have created additional reasons to buy: ease of choice and drinking, that helped them acquire noncustomers, who had previously preferred beers and so on.

    Yellow tail Strategy Canvas
    Source: http://wantwords.co.uk/school/wp-content/uploads/2013/10/Blue-Ocean-Strategy-Canvas1.jpg

    There are some very successful examples of embodying Blue Ocean Strategy, such as Cirque de Soleil (deeper analysis here), a woman-only gyms Curves (find more here) and many more.

    What in my view is the most useful in the whole methodology is that by using just one tool and mapping it (which means having benchmarked competition as well) might let you create a reasonable new product strategy or business idea.

    This is why I recommend adding this one exercise to any workshop focused on new product development or business model. You will be amazed how easily it can produce some new ideas.

    PS You can find the book here:.

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