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The Blue Ocean Strategy Summary (With 3 Examples)
Learn why finding and developing blue ocean markets is your organization’s best chance for growth and profitability.
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. Rather than attempting to gain more share in an already saturated market, Blue Ocean Strategy is about creating demand in a growing, uncontested market and capturing this uncontested space.
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.
Taking a Blue Ocean approach means your goal isn’t to outperform the competition. Instead, your aim is to redraw industry boundaries and operate within that new space, making the competition immaterial. Click To Tweet
- 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.
3 Examples Of Blue Ocean Strategy
Seeing is believing. Here are a few organizations that successfully captured a blue-ocean market:
- Cirque du Soleil: This Canadian entertainment company began in the 1980s as a bunch of “crazy people” with a vision of what the modern circus could be. Traditional circus performances were lighthearted affairs targeted toward children, whereas Cirque offered a more sophisticated experience with some of the world’s best performers. In fact, many of Cirque’s shows included astonishing acts that couldn’t be seen anywhere else. While kids are still part of the target audience, the much higher ticket price guaranteed the primary customers would be adults. Cirque du Soleil did not attempt to be another circus with clowns and performing animals—its Blue Ocean Strategy completely reinvented the market.
- Backroads: This company turned travel into something more challenging and engaging than the typical relaxing itinerary of an all-inclusive cruise or beach vacation. Backroads expanded the industry to offer something novel: luxury active travel. These meticulously designed, fitness-based trips include guides who take guests hiking, biking, camping, and more. Backroads’ Blue Ocean Strategy appealed to a much different audience than vacationers looking to relax, and has played a major role in expanding the industry to include travelers who want to feel fulfilled and accomplished at the conclusion of a trip.
- 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.
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.
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.