What is the Blue Ocean Strategy?
You may have heard of the term “Blue Ocean”. But what does it actually mean and how can it be applied to your business?
The Blue Ocean Strategy is a concept developed by professors W. Chan Kim and Renée Mauborgne at INSEAD Business School. It is about identifying and developing new, untapped market segments instead of fighting competitors in an already saturated market. The book “Blue Ocean Strategy” has now sold over 4 million copies worldwide.
The Blue Oceans concept is based on the idea that companies operate in two types of markets: Red Oceans and Blue Oceans. Red oceans are markets in which companies compete fiercely to win market share. Blue oceans, on the other hand, are markets that are currently undiscovered and therefore there is no competition in these markets.
By focusing on the development (discovery and creation) of a blue ocean, companies can achieve a unique position and permanently dominate a market as a first mover. Well-known examples of the successful pursuit of the Blue Ocean Strategy are, for example, Redbull, Cirque Du Soleil, the development of the Nintendo Switch as well as the positioning of AIDA.
The core instrument of the Blue Ocean Strategy are the Value Curves, in order to systematically analyse markets and find starting points for differentiating one’s own company. Value Curves describe how you create value for your customers.
Defining the Blue Ocean with Value Curves
Here are three steps to apply the Blue Ocean Strategy:
1. Identify the competitive factors of your current market from the perspective of your customers and write these factors on the X-axis of a diagram. Now analyse how the top 3 companies in this market serve the competitive factors mentioned. Use a scale of 1-5 as the Y-axis (where 5 stands for top).
2. Next, decide which competitive factors you would like to deliberately serve better, equally or worse than your competitors.
3. Try to create new relevant competitive factors that give you a unique position and a competitive advantage (your Blue Ocean).
Exercise for applying the Blue Ocean Strategy
Go through the three steps described earlier to create Value Curves for your market. Can you identify a Blue Ocean to create new untapped market opportunities?
Thank you for your attention! We hope you have learned something about the Blue Ocean Strategy and how you can apply it to your business!
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