How To Make Your Competition Irrelevant Using The Blue Ocean Strategy....
The blue ocean strategy is a revolutionary business strategy, instead of operating in red 'bloody' oceans, you can thrive in your own blue ocean...
Happy New Week,
The blue ocean strategy is a concept from Chan Kim and Renee Mauborgne, professors of strategy at Insead. They wrote about it in their 2005 bestselling book "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant". The book challenges the common belief that to achieve great sustainable success and profits, you have to outperform the competition and argues that companies should focus on creating value and growth in unexplored areas.
To understand the blue ocean strategy, we must first understand the red ocean.
A red ocean represents existing industries and markets where industry boundaries and the rules of competition are already defined. Companies strive to outperform competitors and grab a bigger share of the existing market. Cutthroat competition turns the ocean red with blood. This creates a zero-sum game where one company’s gain is another company's loss which makes growth limited.
On the other hand, a blue ocean is a market-creating strategy. It's about creating and capturing unknown markets, where demand is created rather than competing for existing demand. There is an abundance of demand out there just waiting to be captured and how you capture them is by creating something new, different, or adding your own spin to something already existing.
Blue ocean strategists are always focused on value innovation. Value innovation is placing equal emphasis on value and innovation. By focusing on value innovation, companies can truly stand out by offering products or services that give great worth to their customers. If a company can identify what consumers currently value and then rethink how to provide that value, differentiation and low cost can be achieved. Think about things that haven’t been created yet but will create immense value for your customers or more innovative ways to alleviate your customer’s pain points.
Some great examples of blue ocean strategy are Netflix, Uber, Itunes, Ikea, etc. Netflix originally disrupted the DVD rental industry as their original concept was renting out DVDs by mail. They launched netflix.com where customers subscribed to rent an unlimited number of DVDs per month. Through technological advances, in 2007, Netflix introduced streaming which allowed its customers to watch movies and series instantly, rather than having to order a DVD and wait for it to arrive. There were other DVD rental companies such as Blockbuster, which is no longer around today due to them not focusing on value innovation
“Companies rarely die from moving too fast, and they frequently die from moving too slow.” Reed Hastings, co-founder of Netflix.
Netflix created a whole new market, which made them industry leaders and they continue to be industry leaders through constant value innovation. Instead of competing with other companies through price, marketing, branding, etc. They beat their competition in a more strategic and efficient way by creating their own market. They made their competition irrelevant because customers don't have to choose between them or the competition. No one else did what they did, or offered what they offered. Eventually, over time the likes of Hulu, Amazon Prime, and Disney+, have popped but Netflix still has most of the market share.
To conclude, the best way to rise above the competition is to become a pioneer in an uncharted market and gain access to unique growth opportunities. It definitely sounds much easier than it actually is, but if you want to create the next big thing, think of unexplored areas where you can create value and growth. Figure out what you do well, what your competitors do/don’t do, what benefits or offerings you compete on and what can you provide your customers that no one else can.
Have a great week.