Author: Adekola Taylor
Blue Ocean Strategy is an innovative process aimed at creating new market space with strategic offering that creates a rise in value for both the company and the buyers. It offers reproducible tools and methodologies in the pursuit of innovation. It is not aimed at outperforming the competition in the existing industry but to create uncontested marketplace (Mathys, 2008). In Blue Ocean Strategy competition is out of the question because it entails innovative creation of demand rather than fighting over it. Blue Ocean Strategy is geared towards creating profitable high-growth for companies by venturing into a deeper and wider potential market space that is not yet explored (Kim & Mauborgne, 2004). The concept of Blue Ocean Strategy by Kim & Mauborgne (2004) originated from a decade-long study of 150 strategic moves spanning over a hundred years in more than thirty industries. While making the competition irrelevant and unlocking new demand, Blue Ocean Strategy creates a leap in value for the company's employees, company, and its buyers.
The Elements of Blue Ocean Strategy
There are three essential elements of Blue Ocean Strategy, and they are as follows: value innovation, fair process, and tipping point leadership (Mathys, 2008, p.34).
- 1. Value Innovation
Value innovation, the cornerstone of Blue Ocean Strategy, is the concurrent pursuit of low cost and differentiation, making value for the company, its employees, and the customer, thereby creating uncontested and new market place. Value innovation is making the competition irrelevant, eliminating or reducing features that are less valued by the future or current market in order to create high profit growth.
- 2. Tipping Point Leadership
Tipping point leadership, another strategic key in Blue Ocean Strategy, is aimed at accelerating wide-spread transformation. There are four hurdles to be overcome by companies in order to execute Blue Ocean Strategy. These four hurdles are cognitive hurdle, resource hurdle, political hurdle, and motivational hurdle. The principle of tipping point leadership is different from the conventional way of thinking, but rather focuses on transforming the people, and the activities and acts that exercise a disproportionate influence on performance.
- 3. Fair Process
Fair process is geared toward building a strong organization that is based on trust and commitment. It affects behavior and attitudes, and the process involves engagement, explanation, expectation and clarity. Engagement is directed toward involvement of people in the strategic decision that would affect them by making them participate in the decision-making process. By doing so, the people are given fair playground to contribute their idea, oppose the merits of other people’s assumptions, and eventually reach a consensus.
Engagement should foster management’s respect for people and their submissions. Through the process of explanation everyone would have an understanding why the final strategic decisions are made leading to trust between the managers and the employees. Expectation and clarity entail, making distinct statement about the new decisions, and clarifying the standards of judgment and penalties for employees’ misconduct or failure.
Differences between Blue Ocean and Red Ocean
|Blue Ocean||Red Ocean|
|Competition is made irrelevant||Competition is relevant and must be beaten|
|In Blue Ocean uncontested market place is created||Red Ocean centers on Competition in the existing market place|
|Seize and create new demand||Exploitation of existing demand|
|Alignment of the whole system of activities of the company with its strategic choice of low cost or differentiation||Alignment of the whole system of activities of the company in pursuit of low cost and differentiation|
|In Blue Ocean the value-cost trade-off is made||In Red Ocean the value-cost trade-off is broken|
Source: (Mathys, 2008, p.46)
How to Create Blue Ocean
In formulating Blue Ocean four principles are indispensable. These four formulation principles are constructed to tackle how an organization can create Blue Ocean by following four steps of visualizing strategy to reduce the planning risk, looking across the six conventional boundaries of competition (Six Paths Framework), creating new demand by unlocking the three tiers of non-customers, aligning unprecedented utility of an offering with target costing and strategic pricing to launch a commercially-viable Blue Ocean plan, and overcoming adoption hurdles (Mathys, 2008, p.43). The four principles are as stated below (Kim & Mauborgne, 2004):
- How to create uncontested marketplace through the reconstruction of market boundaries,
- Focus on the big picture,
- Reach beyond existing demand and
- Get the strategic sequence right.
In creating Blue Ocean you need to visualize your strategy to capture key factors the industry invests in and competes on, and you also must visualize the offering level the buyers get across these key competing factors abroad. The key factors of service, product, and delivery must be identified. Questions about eliminating, reducing, raise, and creating should be asked to give direction for innovation.
- What factors should be eliminated that the industry has taken for granted?
- What factors should be reduced well below the industry standard?
- What factors should be raised well beyond the industry standard?
- What factors should be created that the industry has never offered?
- Looking across alternative.
- Looking across time or trends,
- Looking across strategic groups,
- Looking across emotional and functional appeal,
- Looking across the chain of buyers,
- Looking across complementary offerings.
In creating Blue Ocean the six paths framework gives room for inspirations and ideas to create uncontested market space by reconstructing market boundaries. The innovation value of Ocean Blue is geared to helping customers do things better or faster with no intellectual or physical difficulty.
Kim, W. Chan; Mauborgne, Renee (2004). Blue ocean strategy. Harvard Business Review: 76– 85. Retrieved from http://hbr.org/2004/10/blue-ocean-strategy/ar/1
Mathys, Lauren (2008). Innovation and Blue Oceans: What is the Link? Retrieved from http://www.norskdesign.no/getfile.php/Filer/Artikler/Foredrag/Lauren% 20Mathys%20-%20N%C3%A6ringslivsdagen%202008.pdf
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