Blue Ocean

Blue Ocean refers to a business strategy concept introduced by W. Chan Kim and Renée Mauborgne in their book "Blue Ocean Strategy." The concept contrasts with "Red Ocean," where industries are crowded with competitors, leading to fierce competition and limited growth. In a Blue Ocean, companies create new, uncontested market spaces, making competition irrelevant by innovating and offering unique value propositions.

Key Concepts of Blue Ocean Strategy

1. Value Innovation

   • The cornerstone of Blue Ocean Strategy, focusing on creating a leap in value for both the company and its customers.

   • Example: Cirque du Soleil revolutionized the circus industry by combining elements of circus and theater, creating a unique entertainment experience.

2. Eliminate-Reduce-Raise-Create Grid

   • A framework to systematically reconstruct buyer value elements to craft a new value curve.

   • Eliminate

     : Identify which factors the industry takes for granted and eliminate them.

   • Reduce

     : Determine which factors should be reduced well below industry standards.

   • Raise

     : Identify which factors should be raised well above industry standards.

   • Create

     : Discover which new factors should be created that the industry has never offered.

   • Example: Nintendo's Wii eliminated high-end graphics (eliminate), reduced processing power (reduce), raised ease of use (raise), and created a new way to interact with games through motion controls (create).

3. Four Actions Framework

   • A tool to create a new value curve by reconstructing market boundaries.

   • Eliminate

     : Which factors can be eliminated?

   • Reduce

     : Which factors can be reduced?

   • Raise

     : Which factors should be raised?

   • Create

     : What new elements can be created?

4. Reconstruct Market Boundaries

   • Look across alternative industries.

   • Look across strategic groups within industries.

   • Look across the chain of buyers.

   • Look across complementary product and service offerings.

   • Look across functional or emotional appeal to buyers.

   • Look across time to shape external trends over time.

5. Focus on the Big Picture, Not the Numbers

   • Use visual tools and strategies to identify and implement the Blue Ocean Strategy.

   • Example: Using a strategy canvas to visually map the current state of play in the market and identify opportunities for differentiation.

Benefits of Blue Ocean Strategy

1. Reduced Competition

   • By creating a new market space, companies face fewer direct competitors, allowing them to dominate the market.

2. Increased Profits

   • Offering unique value propositions allows companies to charge premium prices and achieve higher profit margins.

3. Sustainable Growth

   • Innovating and continuously improving value propositions lead to long-term growth and market sustainability.

4. Customer Loyalty

   • Providing unparalleled value fosters strong customer loyalty and retention.

Examples of Blue Ocean Strategy

1. Cirque du Soleil

   • Transformed the circus industry by blending circus arts with theater, eliminating costly star performers and animal acts.

2. Nintendo Wii

   • Changed the gaming industry by focusing on casual gamers with motion-sensing technology, making games more accessible and fun for a broader audience.

3. Apple iTunes

   • Revolutionized the music industry by offering a digital platform for buying individual songs legally and easily, addressing the illegal downloading issue.

Blue Ocean Strategy encourages companies to break away from the traditional competitive approach and explore innovative ways to create new demand, making the competition irrelevant. By focusing on value innovation and strategic differentiation, companies can unlock new opportunities for growth and success.