The Blue Ocean Strategy: What It Is & How to Use It [+4 Examples]

Of the many strategic planning models that exist, the Blue Ocean Strategy could be considered the pacifist of the group.

Based on an eponymously titled book, this strategy argues that “cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool.” Companies should instead look for new market space and ways to reinvent the industry. In short, avoid head-to-head competition and focus on innovation.

The goal of a Blue Ocean Strategy is for organizations to find and develop “blue oceans” (uncontested, growing markets) and avoid “red oceans” (overdeveloped, saturated markets). A company will have more success, fewer risks, and increased profits in a blue ocean market.

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Summary of the Blue Ocean Strategy

This strategic planning model is a departure from the typical management exercise that focuses on number crunching and competitive benchmarking.

Here are key points of the Blue Ocean Strategy:

• It’s more than theoretical. Some strategic planning models are based on theories that don’t quite pan out during go-to-market executions. In contrast, Blue Ocean Strategy originated from a study that took place over 10 years and analyzed company successes and failures in more than 30 industries. It’s based on proven data rather than unproven ideas.
• The competition is irrelevant. Taking a Blue Ocean approach means your goal isn’t to outperform the competition or be the best in the industry. Instead, your aim is to redraw industry boundaries and operate within that new space, making the competition immaterial.
• Differentiation and low cost can coexist. The Blue Ocean Strategy argues that consumers don’t have to choose between value and affordability. If a company can identify what consumers currently value and then rethink how to provide that value, differentiation and low cost can both be achieved. This is termed “value innovation.”
• You have a framework to test ideas. The Blue Ocean Idea Index is part of the overarching strategy and lets companies test the commercial viability of ideas. This process helps refine ideas and identify opportunities with the most potential, minimizing risk

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4 Examples Of Blue Ocean Strategy

Seeing is believing. Here are a few organizations that successfully captured a blue-ocean market:

Netflix

Early Days: Redefining the Video Rental Market

When Netflix entered the video rental market, it didn't just offer an alternative to Blockbuster; it fundamentally changed how consumers interacted with video content. Blockbuster was deeply entrenched in a traditional retail model with physical stores, which required customers to visit, rent, and return DVDs within a specific timeframe, often leading to late fees.

Netflix recognized that these pain points—late fees and the inconvenience of traveling to a store—were significant barriers to customer satisfaction. By introducing an online DVD rental service that operated through postal mail and eliminating late fees with a subscription model, Netflix offered a solution that was not only more convenient but also more customer-friendly. This move allowed Netflix to tap into a new customer base—those who were dissatisfied with the traditional rental model but still desired access to a wide range of movies.

Transition to Streaming: Opening a New Ocean

As technology advanced and internet speeds increased, Netflix again found itself at a crossroads. Rather than resting on the success of its DVD rental model, Netflix preemptively pivoted to streaming video content. This was a significant leap into another blue ocean, as streaming was a relatively untapped market at the time.

Streaming eliminated the need for physical DVDs entirely, offering instant access to a massive library of content. This not only enhanced convenience but also allowed Netflix to introduce features that were impossible with DVDs, such as binge-watching and personalized recommendations based on viewing history. By doing so, Netflix not only captured existing demand from its DVD customers but also attracted a new audience that preferred on-demand digital content.

Original Content Creation: Defending the Blue Ocean

As other companies began to recognize the value of streaming, the market became increasingly crowded. In response, Netflix identified another blue ocean—original content creation. By producing its own shows and movies, Netflix could offer exclusive content that was unavailable anywhere else. This strategy was pivotal in retaining subscribers and differentiating itself from emerging competitors like Hulu and Amazon Prime Video.

Netflix's original content strategy also allowed the company to control production timelines, content quality, and intellectual property, further insulating it from the competition. Shows like House of Cards and Stranger Things not only drew in new subscribers but also positioned Netflix as a major player in the entertainment industry, capable of competing with traditional TV networks and movie studios.

Global Expansion: Navigating New Blue Oceans

Netflix didn't stop at dominating the U.S. market; it sought out blue oceans in international markets. Recognizing that global audiences had diverse tastes and access to different types of content, Netflix tailored its offerings to various regions. This included acquiring and producing content in multiple languages and catering to local preferences. By entering markets where streaming was still in its infancy, Netflix could establish itself as a dominant player before local competitors emerged.

Uber

The Taxi Industry: An Unchanged Landscape

Before Uber's arrival, the taxi industry was ripe for disruption. The basic model of hailing a cab, paying with cash, and enduring inconsistent service quality had changed little in decades. Customers often faced difficulties in finding a taxi during peak hours, dealing with unprofessional drivers, or navigating unclear pricing. Additionally, the lack of transparency in fare calculation and payment options added to customer dissatisfaction.

The industry was heavily regulated, with taxi medallions (licenses) limiting the number of available vehicles, leading to scarcity, high fares, and a monopoly-like control by a few operators. These conditions created significant pain points for both drivers and customers, leaving the market wide open for innovation.

Uber’s Entry: Redefining Personal Transportation

Uber recognized the inefficiencies within the taxi industry and identified a blue ocean opportunity by redefining how personal transportation could be provided. Instead of building a traditional taxi company, Uber created a technology-driven platform that connected drivers with passengers through a mobile app.

This approach eliminated the need for Uber to own a fleet of vehicles or hire drivers directly. By tapping into the vast pool of private car owners willing to provide rides, Uber could rapidly scale its operations without the overhead associated with traditional taxi services. This asset-light model allowed Uber to offer rides at competitive prices, often lower than traditional taxis, while providing a more reliable and convenient service.

Addressing Pain Points: The Key to Success

Uber’s innovation lay in addressing several key pain points that had plagued the taxi industry for years. First, the mobile app allowed customers to request a ride from anywhere, track the driver’s location in real-time, and receive an estimated fare before the trip even began. This transparency built trust and gave customers greater control over their transportation experience.

Second, Uber introduced cashless payments through its app, providing a seamless and secure transaction process. This feature was particularly appealing in markets where cashless transactions were becoming the norm, reducing the friction associated with handling cash and ensuring that payments were automatically processed.

Third, Uber’s rating system allowed passengers and drivers to rate each other, creating an environment where high-quality service was incentivized. This system addressed the issue of inconsistent service quality, giving Uber a competitive edge over traditional taxis where such feedback mechanisms were nonexistent.

Expanding the Blue Ocean: UberX, UberPOOL, and Beyond

After establishing a strong foothold in the market, Uber continued to explore new blue oceans within the broader transportation space. UberX, a lower-cost option, democratized the service by making it accessible to a wider audience. UberPOOL, a carpooling service, allowed multiple passengers to share rides and split costs, appealing to cost-conscious consumers and reducing the number of vehicles on the road.

Beyond personal transportation, Uber expanded into food delivery with UberEats, freight with Uber Freight, and even explored autonomous vehicles with Uber ATG (Advanced Technologies Group). Each of these ventures represented a foray into new markets where Uber could apply its platform model to meet unmet needs, further distancing itself from traditional competitors.

Global Expansion: Navigating Diverse Markets

Like Netflix, Uber recognized the value of entering international markets early. The company tailored its services to meet local needs, adapting its platform to different regulatory environments, cultural expectations, and market conditions. By doing so, Uber was able to capture demand in regions where transportation options were limited or inefficient, solidifying its position as a global leader in mobility.

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iTunes (Apple)

The Music Industry Before iTunes: A Fragmented Landscape

Before iTunes, the music industry was grappling with the rise of digital piracy. Napster and other peer-to-peer file-sharing networks had made it easy for consumers to download music for free, leading to a significant decline in album sales. The traditional model of buying entire albums, often with only a few desirable tracks, was becoming increasingly unpopular as consumers sought more flexibility and control over their music purchases.

The industry’s response to piracy was primarily legal action, but this did little to curb the problem. Record companies were struggling to find a way to monetize digital music and regain control over distribution. Meanwhile, consumers were frustrated by the lack of legal, convenient options for purchasing music in the format they wanted.

Apple’s Entry: Redefining Music Consumption

Apple recognized the opportunity to create a blue ocean by offering a legal, user-friendly solution to the problems plaguing the music industry. The launch of iTunes in 2003 provided a legitimate platform where consumers could purchase and download individual songs rather than entire albums. This approach fundamentally changed the way people consumed music, shifting the focus from physical media (CDs) to digital files.

By negotiating with record labels to offer their music on iTunes, Apple was able to provide consumers with a vast library of songs at an affordable price—99 cents per song. This pricing strategy appealed to consumers who wanted the freedom to choose only the tracks they liked without the burden of purchasing a full album. At the same time, it provided the music industry with a new revenue stream, helping to combat piracy.

Solving Pain Points: The Key to Success

iTunes addressed several key pain points for both consumers and the music industry. For consumers, iTunes offered convenience, choice, and a simple, easy-to-use interface. Users could quickly find, purchase, and download their favorite songs, which they could then sync to their iPods—another revolutionary product that further enhanced the iTunes ecosystem.

For the music industry, iTunes provided a controlled platform for digital distribution, ensuring that artists and record labels were compensated for their work. The ability to offer music in a digital format while maintaining quality and protecting intellectual property was a significant advantage that traditional distribution methods could not match.

Expanding the Blue Ocean: The iTunes Ecosystem

Apple didn’t stop at simply selling digital music. The company expanded its blue ocean by building a comprehensive ecosystem around iTunes. The iPod, introduced in 2001, became the primary device for storing and playing music downloaded from iTunes, creating a seamless experience for users. This hardware-software integration was a key differentiator that competitors struggled to replicate.

As iTunes evolved, Apple added new features such as podcasts, movies, TV shows, and eventually apps, turning iTunes into a one-stop-shop for all types of digital media. Each of these additions represented a foray into new markets, allowing Apple to capture additional demand and further solidify its dominance in digital content distribution.

Global Expansion: Revolutionizing the Music Industry Worldwide

iTunes wasn’t just a U.S. phenomenon; it revolutionized the music industry on a global scale. By making deals with international record labels and offering localized content, Apple was able to replicate its success in markets around the world. The introduction of iTunes helped standardize digital music distribution globally, setting the stage for the eventual decline of physical media and the rise of streaming services.

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Meta (Previously Facebook)

The Early Days: Creating the Social Networking Blue Ocean

When Facebook launched in 2004, the concept of social networking was still in its infancy. Existing platforms like MySpace and Friendster had introduced the idea of connecting people online, but these platforms were fragmented, cluttered, and lacked the user experience that could appeal to a broader audience. Facebook’s founder, Mark Zuckerberg, recognized the potential to create a more streamlined, user-friendly platform that could connect people in a way that felt personal and meaningful.

Facebook’s initial strategy was to focus on exclusive networks—first Harvard University, then expanding to other Ivy League schools, and eventually opening up to everyone. This approach allowed Facebook to create a sense of exclusivity and community, which drove rapid adoption. The platform’s clean design, real-name policy, and focus on real-world connections differentiated it from competitors and attracted a wide user base. By the time other social networks tried to catch up, Facebook had already established itself as the dominant player in the social networking space.

Solving Pain Points: The Key to Success

Facebook’s success can be attributed to its ability to address several key pain points that users experienced with earlier social networks. The platform offered a more intuitive user interface, a real-name policy that reduced anonymity and increased trust, and a news feed that allowed users to see updates from their connections in real-time. These innovations created a more engaging and safer environment for users, leading to increased time spent on the platform and greater user loyalty.

Additionally, Facebook’s open API allowed developers to create apps and games that could integrate with the platform, further enhancing its appeal and turning Facebook into a one-stop destination for social interaction, entertainment, and communication.

The Shift to the Red Ocean: The Saturation of Social Media

As Facebook grew, so did the entire social media industry. Competitors like Twitter, Instagram (which Facebook acquired in 2012), Snapchat, and TikTok emerged, each offering different forms of social interaction. The once blue ocean of social networking became increasingly crowded, turning into a red ocean filled with fierce competition, where companies battled for user attention and advertising revenue.

Over time, Facebook also faced significant challenges, including concerns about privacy, data security, misinformation, and regulatory scrutiny. These issues further intensified the competition and made it clear that the social networking space was no longer the uncontested market it once was.

The Move to Meta: Exploring a New Blue Ocean

Recognizing the saturation and challenges within the social media industry, Facebook made a bold strategic shift in 2021 by rebranding itself as Meta. This move signaled the company’s intention to explore a new blue ocean: the metaverse. The metaverse represents a virtual space where digital and physical realities converge, allowing users to interact, work, play, and create in immersive 3D environments.

Meta’s vision for the metaverse involves building a platform where users can experience virtual worlds through augmented reality (AR) and virtual reality (VR) technologies. This new direction aims to create a fully immersive digital experience that goes beyond traditional social media, offering opportunities for commerce, entertainment, education, and social interaction in ways that were previously unimaginable.

Expanding the Blue Ocean: Investing in the Future

To realize this vision, Meta has made significant investments in developing the technologies needed to power the metaverse. This includes acquiring VR companies like Oculus, developing advanced AR capabilities, and creating new tools and platforms for developers to build in the metaverse. By taking these steps, Meta is positioning itself to dominate this emerging space before competitors have the chance to establish a foothold.

The metaverse is still in its early stages, and its ultimate success is uncertain. However, Meta’s strategy to move beyond the crowded social networking market and pioneer a new, uncharted territory demonstrates a commitment to continuous innovation and long-term growth. By creating a new blue ocean in the metaverse, Meta aims to redefine the future of digital interaction and maintain its leadership in the tech industry.

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Using Blue Ocean With Your Existing Strategic Planning Model

Most likely, your organization is already running on an existing strategic planning model. Luckily, the Blue Ocean Strategy can be paired with other models. It doesn’t need to replace your current mode of operation. Here are a few examples:

Blue Ocean + SWOT

A Blue Ocean Strategy and SWOT analysis can complement each other effectively in strategic planning. A SWOT analysis provides a clear picture of an organization’s internal strengths and weaknesses, as well as external opportunities and threats. By understanding these elements, an organization can better identify where it stands in the current market.

When combined with Blue Ocean Strategy, which focuses on creating new, uncontested market spaces, the insights from SWOT can guide the organization in leveraging its strengths and addressing weaknesses to pursue new opportunities. For example, strengths identified in the SWOT analysis can be used to build unique offerings that tap into Blue Ocean opportunities, while weaknesses can be mitigated to avoid threats that could hinder entry into new markets.

Running both frameworks together enables an organization to strategically navigate its current environment and successfully expand into new, less competitive spaces, fostering sustainable growth.

Blue Ocean + Balanced Scorecard

Blue Ocean Strategy is all about setting a bold, visionary strategy to move into uncontested market spaces, where competition is minimal, and opportunities for growth are vast. It helps organizations identify and create new markets by offering unique value propositions that differentiate them from competitors.

However, setting the strategy is only the first step. The Balanced Scorecard (BSC) plays a crucial role in executing that strategy. It translates the high-level goals of the Blue Ocean Strategy into specific, measurable objectives across key business areas—financial performance, customer satisfaction, internal processes, and innovation. By doing so, the BSC ensures that every part of the organization is aligned and working towards the strategic goals identified by the Blue Ocean approach.

In essence, Blue Ocean Strategy sets the direction and vision, while the Balanced Scorecard provides the roadmap and tools needed to implement and monitor the execution of that strategy effectively, ensuring that the organization stays on course towards its new market goals.

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Advice On Implementing A Blue Ocean Strategy

When you begin your strategic planning, recognizing the difference between a red and blue ocean may not be as easy as the colors would indicate. Start by identifying what your target market needs and doesn’t currently have. Then look at what existing organizations are doing well (or not so well) to serve that market and determine how you can differentiate (for example, by price point or audience). Use the above checklist as a guide through the process and hold internal brainstorming sessions for each point.

ClearPoint Strategy’s Experience Using the Blue Ocean Strategy

Here at ClearPoint, we recently used the framework for our own business. These were the general questions we discussed and answered in order to highlight our blue ocean opportunities.

1. What do we do well? Why do customers choose us and stay with us?
2. What do our competitors do? Why might our ideal customers choose a different solution?
3. Where are the red oceans? Which features and benefits do we compete head to head with our competitors?
4. What is our blue ocean? What do we provide our customers that no one else can?

We learned that on any given feature, there are lots of competitors that offer good solutions. But no other company offers all of the necessary features for strategy reporting in one place.

Blue Ocean challenges companies to push the boundaries of their industries and offer consumers something unique of immense value. By defining and seeing examples of the Blue Ocean Strategy, your organization can learn how to execute on this strategic planning model and successfully reconstruct your market.

Once you know where you’re competing, you can add unique goals and measures to track your progress in charting that blue ocean.

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Frequently Asked Questions

What is blue ocean strategy?

Blue Ocean Strategy is a business approach that seeks to create a new, uncontested market space, or "blue ocean," rather than competing in an existing market saturated with competitors, known as "red ocean." The goal is to make the competition irrelevant by innovating and offering unique value propositions that open up new demand.

How does blue ocean strategy work?

Blue Ocean Strategy works by focusing on differentiation and low cost simultaneously. It involves:

• Value Innovation: Creating products or services that offer unique benefits and value to customers.
• Eliminate-Reduce-Raise-Create (ERRC) Grid: Identifying which factors the industry takes for granted that can be eliminated, which factors can be reduced below industry standards, which factors should be raised above industry standards, and which new factors should be created.
• Strategic Canvas: Mapping the current state of play in the market to identify opportunities for differentiation.
• Four Actions Framework: Using the ERRC grid to systematically reconstruct market boundaries and create a blue ocean.

How do you create a blue ocean strategy?

To create a Blue Ocean Strategy:

• Assess the Current Market: Understand the competitive landscape and existing market conditions.
• Identify Unmet Needs: Look for gaps in the market where customer needs are not being fully met.
• Use the ERRC Grid: Apply the Eliminate-Reduce-Raise-Create (ERRC) Grid to determine which factors to eliminate, reduce, raise, or create.
• Develop Value Innovation: Create a value proposition that offers unique benefits to customers while keeping costs low.
• Formulate a Strategic Canvas: Map out your new strategy against the existing industry to visualize the differentiation.
• Execute and Monitor: Implement the strategy and continuously monitor and adjust as needed to ensure sustained success.

What is blue ocean strategy with an example?

An example of Blue Ocean Strategy is Cirque du Soleil. Instead of competing with traditional circuses, Cirque du Soleil created a new market space by combining elements of circus and theater, offering a unique entertainment experience that attracted a different audience. This approach allowed them to differentiate themselves and capture a new demand, making the competition irrelevant.

What is blue ocean strategy in simple words?

In simple words, Blue Ocean Strategy is about creating a new, untapped market where there is no competition. Instead of fighting for a share in an existing, crowded market, a business innovates to offer something unique that opens up new demand, making the competition irrelevant.

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