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.
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.
Seeing is believing. Here are a few organizations that successfully captured a blue-ocean market:
Netflix: In this David versus Goliath story, Netflix came on the scene when Blockbuster was at the top of the video rental game. Rather than trying to compete with the popular giant solely on price or entertainment choices, Netflix reinvented the market by creating an entirely new kind of online DVD rental service. It utilized postal mail rather than brick-and-mortar stores. And its flat-fee monthly payment model solved two major pain points many Blockbuster customers experienced: return deadlines and late fees. Netflix customers could keep a DVD for as long as they wanted, without incurring any late fees. Plus, they could browse and select a video to rent, without having to leave their house. Netflix has continued to innovate since then by switching from DVDs to streaming, and then by creating their own shows and movies. By using the Blue Ocean Strategy, Netflix has been able to constantly move to new, uncontested spaces to capture demand.
Uber: Before Uber was founded in 2009, customers looking to get from point A to point B without their own vehicle had to rely primarily on taxis to obtain a private mode of transportation. But the taxi industry hadn’t done much in the way of innovation since its inception more than a century earlier. The founders of Uber recognized the industry’s shortcomings—including limited payment options, a lack of customer trust, and the absence of location tracking—and decided to create a new type of mobility service that would compete in a slightly different space. Instead of trying to buy its own fleet of vehicles, Uber sought out drivers who were willing to use their own cars to provide on-demand rides requested via mobile app. Today, Uber has annual revenues of over $11 billion, and more than 19,000 employees.
iTunes: When iTunes entered the market, it solved the recording industry’s problem of consumers illegally downloading music while simultaneously addressing the demand for digital, a la carte songs. iTunes’ Blue Ocean Strategy created an entirely new category of music sales that allowed artists to profit and consumers to buy single songs versus entire albums. ITunes has dominated this market space for years and is largely credited with driving the growth of digital music.
Meta (Previously Facebook): In October of 2021, CEO Mark Zuckerberg announced that Facebook’s new name would now be Meta. When Facebook started, it was at the forefront of its own blue ocean, known as social networks. More than a decade later, social networking has become a red ocean. With the name change, Meta can steer its product offerings into something new, exciting, and unconquered: the “metaverse.” In the metaverse, Zuckerberg pictures holograms, virtual reality, and digital worlds that feel like the physical world. Although the strategy change is unproven, it’s clear that the idea of jumping from the red ocean of social media to the blue ocean of the metaverse played a part in the decision.
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 SWOT analysis helps determine areas where an organization is doing well and areas it needs to improve.
By running both frameworks together, you’ll be able to identify how your organization can grow in the future.
By running both frameworks together, you can find uncontested markets (blue oceans) and chart the course to get there.
Think of the Blue Ocean Strategy as a way to open up opportunities and markets for a new organization, or an existing organization looking to grow. Your current strategy reporting model will help execute the blue ocean ideas.
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’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.
Co-Founder & Alabama Native
Ted is a Founder and Managing Partner of ClearPoint Strategy and leads the sales and marketing teams.