Breaking Free: How to Leave the Competition in Your Wake With Blue

Blue ocean strategy is a concept and business methodology that focuses on creating new market spaces with little to no competition, also known as “blue oceans”, rather than competing in overcrowded existing markets, or “red oceans”.

:: The key principles behind the blue ocean strategy are:

- Focus on value innovation — Create new demand by offering unprecedented value and new benefits to buyers, rather than compete solely on price or quality. This makes the competition irrelevant.

- Reconstruct market boundaries — Look across conventional industry divisions to find untapped markets. This expands the scope for new demand creation.

- Focus on the big picture — Craft a guiding strategic canvas to place strategic focus on elements that matter most to buyers. Do not get distracted by details.

- Reach beyond existing demand — Find ways to tap into non-customers and convert them into customers. This further grows overall demand.

- Get the strategic sequence right — Focus first on strategy formulation, then commercialisation for efficient and effective rollout.

The concept was first outlined by INSEAD professors W. Chan Kim and Renée Mauborgne in their 2005 bestseller “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant”. Their research found that companies can succeed not by battling competitors, but rather by creating ​“blue oceans” of uncontested market space ripe for growth.

Some examples of companies that succeeded with the blue ocean strategy are Cirque du Soleil in circus entertainment, Netflix in video rental, and Nintendo’s Wii in the console gaming market. Each offered entirely new value propositions to create new demand and rapid growth.

## Analyzing the Competitive Landscape

Before creating a blue ocean strategy, it’s important to understand the current competitive landscape. This involves identifying the market boundaries and direct competitors, assessing the factors that appeal to buyers, and determining how products and offerings are differentiated in the industry.

Key steps in analyzing the competitive landscape include:

- Define the market. Determine the scope of the industry, the geographic boundaries, customer segments, and the breadth of products/services to analyze. A narrow definition may overlook threats while one that is too broad dilutes insights.

- Map out competitors. Identify direct and indirect competitors, including offerings that are substitutes or alternatives for buyers. Look beyond current rivals to include potential new entrants as well.

- Gather intel on competitors. Research competitor offerings, prices, target customers, market share, costs, capabilities, strengths and weaknesses. An in-depth view allows you to compare your company’s position.

- Understand buyer appeal factors. Study what drives demand and what customers value when choosing among industry offerings. Useful techniques include customer surveys, focus groups, and conjoint analysis.

- Assess product differentiation. Determine how competitors currently stand out or attempt to differentiate along dimensions like features, quality, service, customization, capabilities, etc. This reveals opportunities to differentiate.

- Identify pain points. Discover customer difficulties, inconveniences, and unmet needs in current market offerings. These frustrations motivate them to adopt a markedly new alternative.

- Gauge industry trends. Analyze shifts in technology, regulations, demographics, social trends and other external forces in your environment. Anticipating future trends allows you to shape an innovative strategy.

Conducting a thorough examination of your competitive landscape is an indispensable part of crafting a blue ocean strategy. The insights uncovered set the foundation for devising creative ways to transcend existing market boundaries.

## Eliminate Elements Customers Don’t Value

Identifying areas where you can eliminate or reduce elements that add little value for customers is a key part of blue ocean strategy. This allows you to reduce costs and shift focus and value onto the aspects that really matter for buyers.

To determine what to eliminate, take a close look at your offerings and identify components, features or services that add complexity, cost and price but are not highly valued or sought after by most customers. These are prime candidates for elimination.

Some examples of things you may look to eliminate include:

- Extra or niche features only used by a small percentage of customers
- Luxury or high-end options that add costs but don’t align with your target customer needs
- Excess choice or customization options that increase complexity but provide little added value
- Anything that drives up your price but isn’t integral to the core customer experience

Eliminating non-essential elements allows you to refine and focus your offering on what really matters to buyers. This can reduce pricing and complexity while retaining (or even enhancing) core value.

It frees up resources to invest in raising value in the elements that customers do care about. And it supports creating a leap in value for buyers by taking away what they don’t want while enhancing what they do want.

The key is to be ruthless in identifying and eliminating any factors that add cost and price but not value. This clears the path for you to focus on delivering core buyer value in an exceptional way.

## Raise Elements Customers Do Value

Determining which elements of your offering provide the most value for buyers is a key step in blue ocean strategy. This involves assessing your products or services and identifying components that customers care about most.

Some examples of elements that often hold high value for buyers include quality, customization, convenience, customer service, and innovative features. The goal is to determine what exactly your target customers appreciate and would be willing to pay more for.

Once you’ve identified the high-value elements, the next step is to raise your focus on enhancing and promoting these aspects. For example, if your research shows customers care deeply about quality, you would devote additional resources to further improving the quality of your offering. This could involve more rigorous quality testing, investing in higher-grade materials, or improving craftsmanship.

Increasing emphasis on the elements that matter most to buyers helps create new value for customers. It enables you to provide greater satisfaction precisely where they want it. At the same time, it sets you apart from competitors who may not be optimizing around the same components. This differentiation and focus on value helps establish your offering as a blue ocean versus competing in an existing red ocean of rivals.

## Create New Value Elements

The essence of blue ocean strategy lies in creating new value and appeal for buyers. This involves identifying and developing innovative new features, products or services that are not currently offered by competitors in the industry.

Rather than competing on existing elements, blue ocean strategy aims to create new elements that buyers value and are willing to pay for. This opens up new demand and attracts new customers who had previously been unattended to.

Some examples of creating new value elements include:

- A restaurant offering ultra-fast delivery of quality cuisine that is not currently available. This taps into buyer needs for speed and convenience.

- A car company developing a self-driving vehicle. This creates the new element of freedom from driving that buyers would value.

- A retailer creating an engaging, personalized online shopping experience. This leverages new technology to deliver a unique buying experience.

The key is to understand latent, unarticulated buyer needs and create elements that directly address those needs. The new elements should raise buyer value substantially.

Innovative new features, products or services allow you to differentiate from competitors and stake out a new market frontier. Rather than fighting competitors on the same playing field, you change the field to your advantage. Creating new value elements is at the core of unlocking blue oceans of uncontested market space.

## Reconfigure the Value Chain

To successfully execute a blue ocean strategy, companies need to rethink how they deliver value to buyers. This may require reconfiguring their value chain and internal processes.

Some ways to reconfigure the value chain include:

- Rethinking purchasing and sourcing. For example, a company could work directly with suppliers to get custom components that support differentiated offerings.

- Optimizing manufacturing and operations to align with the new strategy. Manufacturing processes and quality control should enable new product features or services.

- Reevaluating distribution channels. Companies may need to reach new sets of buyers which could require different distribution partners.

- Rethinking marketing and sales efforts around the differentiated offerings and value. Marketing should educate buyers on why the company’s offerings are unique.

- Modifying service activities and support process to deliver on the new buyer value proposition. Service teams need to be ready to support unique product features or services.

Internal processes across the company should be evaluated and adapted to align with the blue ocean strategy. Things like budgeting, performance metrics, training and employee incentives may need adjusting.

The goal is to reconfigure the value chain in a way that allows the company to deliver unmatched value to buyers in a profitable way. Companies that successfully align all their activities with the new strategic positioning can execute an effective blue ocean shift.

## Develop a New Pricing Model

A key component of blue ocean strategy is developing a new pricing model that aligns with the shifts in value for the customer. Since you’ve eliminated features that were not valued by customers, you can reduce pricing in those areas. At the same time, you’ve raised elements that customers do value, so you can increase pricing to capture that added value.

Additionally, as you introduce new value elements that were previously unavailable, you have the opportunity to price those innovations at a premium. Customers have not been able to access those benefits before, so they will be willing to pay more for the unique value you’ve created.

The goal is to price in a way that communicates the exceptional value proposition to buyers. You want to orient pricing around the full experience and benefits you deliver, not benchmarked to competitors’ pricing. This new pricing model will reinforce your differentiation and attract customers who appreciate the new value you’ve designed.

To develop this new pricing model:

- Analyze which features you’ve eliminated and reduce pricing accordingly
- Examine which offerings you’ve enhanced and raise pricing to reflect the added value
- Consider the new experiences you’ve created and price them at a premium for their innovative value
- Design pricing tiers and bundles that align with the shifted value delivery
- Communicate pricing in terms of the full value proposition, not feature-by-feature

With the pricing properly aligned to the reconstructed value chain, you create a full experience that is both highly valued and competitively priced. This pricing strategy helps sustain the blue ocean as you continue delivering exceptional value.

## Build a Strong Brand Identity

Creating a strong, recognizable brand identity is a critical component of executing a blue ocean strategy successfully. The new value curve you have created needs to be clearly communicated through your branding and positioning. This allows you to highlight your differentiated offerings and make the competition irrelevant.

To build an effective brand identity:

- Focus on creating distinctive brand positioning that captures the essence of your unique value proposition. Emphasize the key factors that make your value curve and offerings one-of-a-kind.

- Craft a compelling brand story and narrative that engages customers emotionally with your mission and vision. Share your brand purpose and ideals.

- Design consistent visual brand elements like logo, fonts, color palette that reinforce your desired brand image. Align your branding across all touchpoints.

- Prominently feature your key differentiators and most innovative value elements that competitors lack. Show don’t tell what makes your brand stand out.

- Communicate your positioning clearly across all channels and content. Repeat your core messaging frequently to sink in.

- Deliver and reinforce your unique value proposition consistently through customer experiences. Exceed expectations.

- Invest in marketing initiatives that creatively showcase your brand’s distinctive identity. Cut through noise.

- Leverage brand advocates and influencers to organically spread awareness of your uncompromising brand.

- Measure brand awareness and associations periodically to ensure your identity is projecting intended image and values. Tweak if needed.

With a strong, clearly defined brand identity centered around your differentiated offerings, you can stand out in the blue ocean and avoid competing directly within crowded market spaces.

## Execute the Strategy Effectively

Once the Blue Ocean Strategy has been developed, proper and effective execution is critical to successfully implementing the new value proposition and business model. The strategy must be properly rolled out across the entire organization to ensure alignment.

Some key steps for effective execution include:

- **Secure senior management commitment and leadership** — Top management must fully support the strategy and lead the change effort. They need to communicate the vision and rationale clearly.

- **Assign implementation responsibilities** — A Blue Ocean strategy execution team should be created with clear roles and responsibilities. Each division/department must understand how the strategy impacts their work.

- **Align systems and structures** — Existing processes, reporting structures, KPIs, incentives etc may need reconfiguring to support the new strategic priorities. Anything misaligned must be addressed.

- **Conduct training and education** — Extensive training at all levels ensures employees understand the details of the strategy and the part they play. Change management techniques can help facilitate the transition.

- **Allocate resources appropriately** — The strategy may require new investments and resource allocations across the organization. Budgets and headcount should be adjusted accordingly.

- **Develop a rollout timeline** — A detailed, phased rollout schedule with milestones, targets and metrics should guide the implementation.

Overcoming adoption challenges is vital. Resistance is natural. Engaging staff early and emphasizing the rationale and benefits can secure buy-in. Celebrating small wins creates momentum while incentives motivate change adoption. With proper preparation, leadership commitment and change management, organisations can successfully execute Blue Ocean Strategy.

## Sustain the Blue Ocean

After launching and executing a successful blue ocean strategy, companies must take active steps to sustain it over the long term. Maintaining your differentiated value proposition requires focus and continued effort.

### Continuing Innovation and Improvement

Once your blue ocean offering is on the market, you cannot become complacent. Customer preferences evolve, so you need to keep innovating, improving your offering, and staying ahead of changing demand. Seek ongoing feedback from customers to understand how the market is shifting. Use this to guide incremental innovations that continue delivering exceptional value.

### Responding to Competitive Moves

As your blue ocean offering succeeds, it will attract new competitors. Monitor the market landscape for imitators or alternative offerings aiming to steal market share. Analyze competitive moves and determine if you need to adjust your strategy. You may need to add new value elements or capabilities to stay ahead of the competition. The key is responding strategically while staying true to your differentiated value proposition.

### Maintaining Differentiated Value

While adapting to market changes, it’s critical to maintain your blue ocean strategy’s differentiated value and appeal to customers. Don’t erode the factors that make your offering unique in pursuit of short-term gains. When expanding into adjacent markets or releasing new products, ensure they align with and reinforce your distinctive value proposition. Keep delivering the innovation, quality and appeal that drew customers to you in the first place.